Carla redeemed EE bonds which qualify for the educational exclusion.The redemption consisted of $14,000 principal and $6,000 interest.The net qualifying educational expenses are $10,000.Her AGI is below the threshold for phase-out of the exclusion.The taxable interest is

Question

Quizplus · Accepted Answer

The taxable interest is calculated by subtracting the net qualifying educational expenses from the total redemption amount and then applying the proportion of interest to the remaining amount. Here, $6,000 interest x ($10,000 expenses / $20,000 total redemption) = $3,000 exclusion, so $6,000 - $3,000 = $3,000 taxable interest.

Carla Redeemed EE Bonds Which Qualify for the Educational Exclusion