During the early 90's my parents bought me about fifty EE bonds ranging from 500-1000 dollar values. I never used them because I using money that I saved in high school and worked a lot in college in order to pay for school. I was planning on starting to cash them out when they no longer accrue interest at 30 years of age.

My wife still has a few thousand dollars of student loans to pay off and I was wondering if I could cash in my EE bonds to pay off her student loans and not pay income tax on the interest the bonds had earned.

During the early 90's my parents bought me about fifty EE bonds ranging from 500-1000 dollar values. I never used them because I using money that I saved in high school and worked a lot in college in order to pay for school. I was planning on starting to cash them out when they no longer accrue interest at 30 years of age.===> Once a savings bond matures it no longer earns interest. So you?re losing the money you?d get if you reinvested in a new savings bond that?s earning interest.Also, the IRS considers the income tax to be due in the year the savings bond matures. If you don?t cash it that year, you won?t get a tax form to help you declare this. When you declare it later, the IRS can penalize you for not declaring it in the right year. EE savings bonds only earn interest for 30 years; if you happen to be sitting on a bond that is older than 30 years, it doesn't make much sense to keep it invested in an interest-less bond, so cash it in. Interest on Series EE savings bonds is taxable on your federal tax return, but not at the state or local level


My wife still has a few thousand dollars of student loans to pay off and I was wondering if I could cash in my EE bonds to pay off her student loans and not pay income tax on the interest the bonds had earned======>>>>You?re asking whether you can use the EE savings bonds to pay off her college loans and have the interest earnings qualify for the education tax exclusionYou can. say she is a college student enrolled at a major university or trade school. If the school is qualified for federal student loan programs like Stafford and Perkins loans, you are eligible to cash in your savings bonds tax-free. You may be able to cash in qualified U.S. savings bonds without having to include in your income some or all of the interest earned on the bonds You pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return.
There?s no penalty, you?ll just owe income tax on the deferred interest earnings. You have the option of deferring taxes until you cash the bond in, or paying taxes when the bond matures ? whichever comes first. If you do not wish to defer taxes, you may pay them at the end of the year.