Savings bonds a loser?

September 2, 2006 6:43 PM

Kids Savings bond (EE) question: If they are past their "hold" period, isn't it better to cash them in and put into their 529 fund where they are likely to earn better than 3-4%???
posted by turtle42 to work & money (2 comments total)

The interest may be higher in a 529, but the earnings on the bond may be taxable. Yes even kids get taxed if they earn enough. Consult your local IRS office to be sure.
posted by Gungho at 7:15 PM on September 2, 2006

Here's what I found. YMMV


Children's Taxes

New rules for the "kiddie tax", stemming from the Tax Increase Prevention and Reconciliation Act, take effect in 2006. Unearned income over $1,700 for children under age 18 will now be taxed at the parents' top rates. Prior law applied the kiddie tax to children under age 14. Children under age 18 pay no tax on their first $850 (in 2006) of unearned investment income and only 10% on the next $850 in 2006. Any additional income is taxed at their parents' highest marginal tax rate.
posted by Gungho at 7:39 PM on September 2, 2006