Bonds for Tuition?

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Physician's Money Digest, March31 2004, Volume 11, Issue 6

Avoid using your child's savingsbonds to help pay for college. A bond'srate of return is not likely to keep up withthe continuing rise in college costs.Children and young adults will not qualifyfor tax-free interest because the bond'sowner must be age 24 or older at the dateof issue to obtain the tax-free benefit.Owner-parents of the bonds who want touse the tax-free benefit must also watchtheir incomes. Joint filers begin to lose thetax-free perk when their adjusted grossincome in 2004 is $116,750 ($59,850 forsingle filers) and the benefit disappearscompletely at $119,750 ($74,850 for singlefilers). Finally, the chance of securingneed-based financial aid is loweredbecause earned interest is figured intofinancial aid forms.