Early in my husband's working career he would purchase EE and then eventually I savings bonds each month through a payroll deduction at his employer. The first one (earning 4% interest!) has matured this month and in researching what to do with the matured bond amount, I came across that you can roll them over into a 529 without paying taxes on the interest that's accrued. So for the $50 face value bond that matured on May 1st, there is also $157.24 in interest for a total redeemed value of $207.24. We will have one, sometimes two of these bonds maturing every month for the next 4 years. At 24% marginal tax rate that'll add up over the years and if we can put the $ into a 529 plan to be used for our kids' (ages 7 and 10) eventual college expenses, that'd be ideal.
Has anyone done this? I'm trying to figure out how this "roll over" is actually accomplished and documented at tax time. Is it as simple as adding the equivalent amount into the 529 and then checking a box on your taxes that says it is a qualified rollover or something of the sort? Or do we have to link the 529 to our treasury direct account somehow? Any info/help would be great. Thanks!
