Series EE and Series I Savings Bonds are issued by the U.S. Treasury. These bonds have tax advantages—you do not pay state or local income tax on the interest earned, and federal income tax can be deferred until you redeem the bonds or they reach maturity. In addition, you may never have to pay tax on all or a portion of the interest if you redeem the bonds in the year in which you pay your child's college tuition.

Series EE bonds purchased after 1989 and Series I bonds that are redeemed to pay for college tuition may not be taxed at all—as long as the parent's modified adjusted gross income (AGI) falls below a certain dollar amount. For redemptions in 2016:

• The interest is completely tax-free for joint filers with modified AGI less than $116,300 and $77,550 for all other taxpayers (in 2015 these amounts are $115,750 and $77,200 respectively).
• The interest is only partially taxable for joint filers whose modified AGI is over the above threshold and less than $146,300 and $92,550 for all other taxpayers (in 2015 these amounts were $145,750 and $92,200 respectively).
• The interest is completely taxable for joint filers whose modified AGI is $146,300 and above $92,550 for all other taxpayers (in 2015 these amounts were $145,750 and $92,200 respectively).

This exclusion is not available to married individuals who file separate returns.

In order to get this federal tax break, the bonds generally must be purchased by a parent, the parent must be at least 24 years old, and the bonds can never be in the child's name. Form 8815 (Exclusion of Interest from Series EE and I U.S. Savings Bonds Issued after 1989) is used to figure out how much of the interest can be excluded from income.