Copperhead Tax Services

Use Savings Bonds to Pay for College and Get a Tax Advantage – Did You Know?

Ordinarily, interest earned on U.S. savings bonds is taxable income. However, if you pay higher education costs, then you may qualify to cash in federal series EE or I bonds tax-free. The IRS Education Savings Bond program allows eligible people to exclude some or all of their U.S. bond interest from their gross income, provided that they use the bonds to pay tuition and certain required fees at a qualifying higher education institution.

To be eligible for this program, you must pay the education expenses for yourself, your spouse or a dependent. The program is subject to income limits, which the IRS adjusts annually for inflation. Other eligibility restrictions may apply, such as limitations on the expenses you may pay using the bonds if the student also receives tax-free scholarship funds. A tax professional can help you determine whether you qualify for the Education Savings Bond program, and if so, how much of the interest on your bonds could be exempt from tax.

Clean Energy Tax Credit Scams – Did You Know?

The Inflation Reduction Act 2022 made it possible for people to sell certain clean energy tax credits. In these credit transfers, both the seller and purchaser must meet strict eligibility requirements and file required paperwork with the IRS. Unfortunately, dishonest tax return preparers are actively encouraging people to ignore the rules and improperly claim purchased clean energy credits. These scammers lure people in with false claims that the credits may be used to reduce tax on a wide variety of income types.

In reality, purchased credits may generally only be used to offset tax on passive activity income, which most people do not have. Regardless of what a scammer tells them, anyone who attempts to use purchased tax credits inappropriately, or claims credits they did not actually purchase, may face additional tax assessments and IRS penalties. Meanwhile, the scammer disappears with the fees they collected to file an inaccurate return on the person's behalf.

A tax professional can help you determine whether purchasing clean energy credits would actually reduce your tax, and if so, help you complete and file all the required forms.