In December of this year, Jake and Stockard, a married couple, redeemed qualified Series EE U.S. Savings Bonds. The proceeds were used to help pay for their daughter's college tuition. Jake and Stockard received proceeds of $8,000 representing principal of $5,000 and interest of $3,000. The qualified higher educational expenses they paid this year totaled $6,000. Their AGI is below the threshold for phase- out of the exclusion. What is the amount of interest income Jake and Stockard can exclude from their income this year?

Question

Quizplus · Accepted Answer

The exclusion is calculated by multiplying the interest by the ratio of qualified expenses to total proceeds: ($3,000 interest) x ($6,000 expenses / $8,000 proceeds) = $2,250.

In December of This Year, Jake and Stockard, a Married