Updated November 5, 2026. Quick answer: For 2027 the exclusion for savings bond interest used to pay higher education costs begins to phase out at modified adjusted gross income above $105,100 for most filers and $157,600 for joint returns, and is gone at $120,100 and $187,600, per Rev. Proc. 2026-35, section 3.19. The 2026 thresholds were $101,800 and $152,650. The exclusion applies to Series EE and I bonds issued after 1989 and cashed to pay qualified tuition and fees.
The 2027 thresholds
The Revenue Procedure states: “For taxable years beginning in 2027, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $157,600 for joint returns and $105,100 for all other returns.” “The exclusion is completely phased out for modified adjusted gross income of $187,600 or more for joint returns and $120,100 or more for all other returns.”
| Tax year | Phase-out starts above MAGI of | Exclusion gone at MAGI of | Source |
|---|---|---|---|
| 2025 | $149,250 joint, $99,500 others | $179,250 joint, $114,500 others | Form 8815 (2025) lines 9 and 10 |
| 2026 | $152,650 joint, $101,800 others | $182,650 joint, $116,800 others | Rev. Proc. 2025-32, section 4.17, savings bond exclusion |
| 2027 | $157,600 joint, $105,100 others | $187,600 joint, $120,100 others | Rev. Proc. 2026-35, section 3.19, savings bond exclusion |
How the phase-out works, and a check
The statute reduces the exclusion by a fraction: “the amount which would (but for this paragraph) be excludable from gross income under subsection (a) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so excludable as such excess bears to $15,000 ($30,000 in the case of a joint return).”
Check: the 2027 range for joint returns is $187,600 minus $157,600, or $30,000 (computed), and for other returns $120,100 minus $105,100, or $15,000 (computed). Both match the statute’s divisors. A single filer with modified adjusted gross income of $112,600 (invented, for the computation) is $7,500 over $105,100 (computed), which is half of the $15,000 range (computed), so half of the otherwise-excludable interest is lost. On $1,000 (invented, for the computation) of otherwise-excludable interest that leaves $500 (computed). These are illustration numbers.
Which bonds and which costs qualify
A qualifying bond is one issued “after December 31, 1989,” “to an individual who has attained age 24 before the date of issuance,” at a discount. Qualified expenses are “tuition and fees required for the enrollment or attendance of” the taxpayer, the spouse or a dependent at an eligible educational institution. The statute also provides: “this section shall apply only if the taxpayer and his spouse file a joint return for the taxable year.” Married people who file separately cannot use the exclusion.
Where it goes on the return
The IRS form ends with “Excludable savings bond interest. Subtract line 13 from line 8. Enter the result here and on Schedule B (Form 1040), line 3”. The form-level walk-through is on Form 8815, the savings bond interest exclusion, and how the bond interest first reaches the return is on Form 1099-INT box 3, savings bond and Treasury interest. The same interest also reduces the educator deduction, covered on the educator expense deduction for 2027.
Common mistakes
- Using last year’s $101,800 or $152,650 threshold for 2027 income. The 2027 thresholds are $105,100 and $157,600.
- Forgetting that expenses paid with scholarships or counted for an education credit reduce the qualified expenses first.
- Filing as married filing separately and expecting any exclusion. The statute allows it only on a joint return.
- Assuming every savings bond qualifies. Bonds issued before 1990, or to someone under age 24 at issue, do not.
Related: Form 8815, the savings bond interest exclusion, Form 1099-INT box 3, savings bond and Treasury interest, the educator expense deduction for 2027, and the education credits for 2027.
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Answer againSources
- Internal Revenue Service, Rev. Proc. 2026-35, tax year 2027 inflation-adjusted items: www.irs.gov
- Internal Revenue Service, Rev. Proc. 2025-32, tax year 2026 inflation-adjusted amounts, as modified by the One, Big, Beautiful Bill Act: www.irs.gov
- 26 U.S.C. 135, Income from United States savings bonds used to pay higher education tuition and fees (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
- Internal Revenue Service, Form 8815 (2025), Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989: www.irs.gov
Read from the primary documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.