Generally, you must pay tax on the interest earned on U.S. savings
bonds. If you do not include the interest in income in the years it is
earned, you must include it in your income in the year in which you
cash in the bonds.
However, you may not have to include the interest in your income in
the year in which you cash in the bonds if you pay higher education
expenses during that year for you, your spouse, or a dependent for
whom you claim an exemption.
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