Form 8815 for 2026, Line by Line: Savings Bond Interest for College

Savings bond interest has an unusual place in the tax code: most owners can postpone reporting it until the year they cash the bond or it matures, whichever comes first, and for some families it can then disappear altogether. The provision behind it, section 135 of the Internal Revenue Code, rewards people who cash a bond in the same year they pay for college. The mechanism is a one-page form, Form 8815, whose fourteen lines are easy to fill in once you see what each one is doing. The IRS has posted a 2026 draft of the form (created May 7, 2026) and a draft of the instructions dated July 8, 2026, so the line references below come from drafts. The 2026 income thresholds printed on the draft match the ones the IRS had already set in Rev. Proc. 2025-32. The IRS says it will post a new draft if changes are made, which is why it is worth checking the final version once it is released.

Who can use the exclusion

The 2026 draft instructions list four conditions that must all apply. You cashed qualified Series EE or Series I bonds in 2026 that were issued after 1989. You paid qualified higher education expenses in 2026 for yourself, your spouse or your dependents. Your filing status is anything except married filing separately. And your modified adjusted gross income falls below $116,800 for single, head of household and qualifying surviving spouse filers, or below $182,650 for joint filers.

The fourth test is a slope, not a cliff. Between the two numbers on the form you get a shrinking share of the exclusion, which reaches zero at the upper number, and the slope is exactly $15,000 wide for single filers and $30,000 wide for joint filers. That width shows up in line 12, where you divide the amount over the lower threshold by $15,000 or $30,000.

The age-24 rule that catches parents

The ownership rule is where this exclusion most often fails in practice. The instructions say the bonds must be “issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse’s name,” and that “you must have been age 24 or older before the bonds were issued.” Then comes the sentence that surprises families: “A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child.”

So a bond a grandparent bought in a grandchild’s name, or one a parent bought in a newborn’s name, is out. A bond a 30-year-old bought in her own name years ago and now cashes to pay for her own master’s degree, or for the tuition of a child she claims as a dependent, can qualify, subject to the income limits. If you are weighing which kind of bond to buy in the first place, our comparison of Series I and Series EE bonds covers how the two differ in rates and holding rules.

Lines 1 to 4: what counts as an expense

Line 1 asks for the name of the student and the school. The student must be you, your spouse or a dependent claimed on your return, and the institution is generally an accredited public, nonprofit or private college, university, vocational school or other postsecondary institution; it must also be eligible to participate in the student aid programs run by the Department of Education.

Line 2 is total qualified higher education expenses paid in 2026. The instructions count tuition and fees required for enrollment or attendance. They exclude room and board, and courses involving sports, games or hobbies that are not part of a degree or certificate program. They also say not to include expenses that were covered by nontaxable educational benefits paid directly to or by the school, that you used to figure an education credit on Form 8863, or that you used to figure the nontaxable part of a Coverdell or 529 distribution. In plain terms, the same dollar of tuition cannot do two jobs.

Line 3 is the part of the line 2 expenses covered by nontaxable educational benefits, such as scholarships excludable under section 117, veterans’ educational assistance and employer assistance not included in box 1 of your W-2. Benefits paid directly to or by the school stay off line 3, because the expenses they covered never went on line 2. The draft instructions’ own example: $10,000 of expenses and a $2,000 nontaxable scholarship paid directly to the student means $10,000 on line 2 and $2,000 on line 3. Line 4 is the difference, and if it is zero or less you stop.

Lines 5 to 8: the ratio most summaries skip

Line 5 is the total proceeds, “principal and interest,” from all Series EE and I bonds issued after 1989 that you cashed during 2026. Line 6 is the interest included in that amount. If you did not report any of the interest in earlier years, you can take it from line 8 of Form 8818, the optional record the instructions suggest for logging each redemption, or work it out on the Line 6 Worksheet. That worksheet figures your principal by taking 50 percent of the face value of paper Series EE bonds plus the full face value of electronic Series EE bonds (including paper EE bonds converted to electronic form) and all Series I bonds, then subtracting that from the proceeds. If you reported some interest in earlier years, you subtract that amount too.

Now the key step. Line 7 reads: “If line 4 is equal to or more than line 5, enter ‘1.000.’ If line 4 is less than line 5, divide line 4 by line 5.” The denominator is the whole payout, not just the interest. A filer with $4,000 of net expenses who cashes $12,000 of bonds, of which $4,000 is interest, has a ratio of 0.333, not 1.000, even though the expenses equal the interest. Only about one third of the interest, $1,332, qualifies before the income phase-out. Once the proceeds exceed the bill, cashing more bonds adds interest that is mostly taxable, and because that interest also lifts your modified AGI on line 9, it can shrink the exclusion through the phase-out. Match the redemption to the expense when you can. Line 8 multiplies the interest on line 6 by the ratio on line 7.

If you plan to cash bonds by mail, the mechanics are in our guides to FS Form 1522 for paper bonds and FS Form 5512 for bonds held in TreasuryDirect. Whichever route you use, keep the serial number, issue date, face value and total redemption proceeds of each bond, because the instructions list those as the records that support the exclusion.

Lines 9 to 14: the income phase-out

Line 9 is your modified AGI, built on the Line 9 Worksheet in the instructions. Line 1 of that worksheet asks for “the amount from line 2 of Schedule B (Form 1040),” your total interest before any savings bond exclusion. The bond interest you are trying to exclude is therefore inside the income that limits the exclusion. The worksheet then adds your other income from Form 1040 and Schedule 1, subtracts a specific list of adjustments, and adds back items such as the foreign earned income exclusion and the exclusion for employer adoption assistance. On the 2026 draft of Schedule B, line 2 adds up every interest amount listed on line 1, and line 3 is where the Form 8815 exclusion comes off. Claiming the exclusion is also one of the situations that require Schedule B even when your interest is $1,500 or less, as our guide to when Schedule B is required explains.

Line 10 is the entry point: $101,800 for single, head of household or qualifying surviving spouse, or $152,650 for joint filers. If line 9 reaches $116,800 or $182,650, the form tells you to stop. Otherwise line 11 subtracts line 10 from line 9, line 12 divides by $15,000 or $30,000, and line 13 multiplies line 8 by that decimal. Line 14, the excludable interest, is line 8 minus line 13. It goes on Schedule B, line 3.

A worked example

Take a single filer in 2026 who paid $9,000 of qualified tuition and received a $1,000 nontaxable scholarship paid directly to her. She cashed bonds for $12,000, of which $4,000 was interest. Her modified AGI is $108,000, which includes that $4,000 of bond interest. The arithmetic, recomputed in Python and checked line by line, runs like this.

Of her $4,000 of interest, about $1,566 is excluded and the rest is taxed. Two details matter. If she had spent $12,000 on net qualified expenses, line 7 would be 1.000 and her pre-phase-out amount would be the full $4,000. And if she had forgotten that the bond interest sits inside line 9 and used $104,000 instead of $108,000, she would have computed an exclusion of about $2,276, overstating it by roughly $710. The same filer with identical numbers in 2027, with the single threshold at $105,100, would have a line 11 equivalent of $2,900 and an exclusion of about $2,153. That is illustrative only, because the IRS has not yet published a 2027 form.

The 529 and Coverdell route

The instructions say qualified expenses “also include contributions to a Coverdell ESA or a QTP for the person(s) listed on line 1,” and the line 1 instructions tell you to enter in column (b) “Coverdell ESA” with the name and address of the financial institution where the account is held, or “QTP” with the name and address of the program. That opens a planning path for a parent who owns old bonds: cash them, contribute the proceeds to a 529 for a dependent child, and count the contribution as the expense. The catches are the same as before. The bonds must meet the age-24 test, the contribution counts toward line 2 only if the child is your claimed dependent, and tuition you already used to figure the nontaxable part of a Coverdell or 529 distribution can’t go on line 2.

Common mistakes to avoid

Don’t enter room and board on line 2, and don’t reuse tuition you already counted for the American opportunity or lifetime learning credit on Form 8863. Don’t file as married filing separately and expect the exclusion. Don’t pick the redemption amount without considering line 7. And don’t treat the 2026 draft’s lines and wording as final until the IRS releases the form, since drafts can change when legislation passes; the dollar thresholds themselves come from Rev. Proc. 2025-32. For the other 2027 figures that moved at the same time, our IRS 2027 inflation adjustments tracker lists each one against its source.

Sources

• IRS, Form 8815 (2026) draft, created 5/7/26 — https://www.irs.gov/pub/irs-dft/f8815—dft.pdf
• IRS, Instructions for Form 8815 (2026) draft, dated July 8, 2026 — https://www.irs.gov/pub/irs-dft/i8815—dft.pdf
• IRS, Rev. Proc. 2026-35, section 3.19 (2027 adjusted items) — https://www.irs.gov/pub/irs-drop/rp-26-35.pdf
• IRS, Rev. Proc. 2025-32, section 4.17 (2026 adjusted items) — https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS, Schedule B (Form 1040) (2026) draft, created 4/7/26 — https://www.irs.gov/pub/irs-dft/f1040sb—dft.pdf
• IRS, Instructions for Schedule B (Form 1040) (2025) — https://www.irs.gov/pub/irs-pdf/i1040sb.pdf
• IRS, Publication 550 (2025), Series EE and Series I bonds — https://www.irs.gov/pub/irs-pdf/p550.pdf