In September 2012, Bill and Linda, a married couple with $50,000 gross income, cashed qualiﬁed Series EE U.S. Savings Bonds which they had purchased in 2008. The proceeds were used to help pay for their son's 2012 college tuition. They received gross proceeds of $3,500, representing principal of $3,000 and interest of $500. The qualiﬁed higher education expenses they paid in 2012 totaled $2,100. Their modiﬁed adjusted gross income for the year was $20,000. How much of the $500 interest can Bill and Linda exclude from gross income in 2012?

Question

Quizplus · Accepted Answer

$300. This is calculated as follows:
Qualiﬁed Expenses = Percentage Exclusion Series EE Proceeds
Percentage Exclusion x Series EE Interest = Interest Exclusion Percentage Exclusion = $2,100/$3,500 = 60%
Interest Exclusion = $500 × 60% = $300

In September 2012, Bill and Linda, a Married Couple with $50,000