Are federal savings bond interest included in magi?
Executive summary
Federal savings‑bond interest ordinarily flows into gross income and therefore into adjusted gross income (AGI) — and whatever a particular program defines as MAGI will usually start from AGI — but exclusions and program‑specific MAGI rules change the outcome: interest excluded under the education‑use rule can be excluded from AGI for income tax purposes yet still be “added back” when some federal programs compute MAGI (ACA, Social Security benefit tests), so the short answer is: mostly yes for taxable interest, but sometimes no for tax‑return AGI and sometimes yes again when specific MAGI definitions require adding the exclusion back [1] [2] [3] [4] [5].
1. How savings‑bond interest normally appears on a tax return
Interest earned on Series EE and Series I U.S. savings bonds is generally taxable at the federal level and is reported as interest income on Form 1040 (reported via Form 1099‑INT when redeemed), which makes it part of gross income and AGI unless a statutory exclusion applies (TreasuryDirect; IRS guidance) [2] [1] [6].
2. The education exclusion and Form 8815: a tax‑return exception
If bonds were issued after 1989 and proceeds are used for qualified higher‑education expenses, a taxpayer who meets filing status and income thresholds can exclude some or all of that bond interest using IRS Form 8815; the form explicitly instructs taxpayers to enter their modified adjusted gross income to determine eligibility and the phaseout (IRS Form 8815 and TreasuryDirect guidance) [3] [7] [1].
3. MAGI is not a single universal number — program definitions matter
“MAGI” is a chameleon: many federal programs define MAGI by starting with AGI and then adding back certain items, but which items get added back varies by statute and guidance; for example, Social Security inclusion rules treat tax‑exempt income (including tax‑exempt bond interest) as part of the relevant MAGI calculation used to determine how much of benefits are taxable, per IRS/TaxNotes analysis [4].
4. Education‑excludable savings‑bond interest and MAGI: mixed outcomes
Although excluded savings‑bond interest reduces federal AGI on the tax return when claimed under Form 8815, some program‑specific MAGI definitions explicitly add back that excluded interest; the Congressional Research Service and practitioner discussions note that interest from U.S. savings bonds used for higher education can be added back when computing MAGI for programs like the ACA premium tax credit, so the exclusion for income‑tax purposes does not uniformly remove the dollars from every MAGI test [5] [3].
5. Practical rule of thumb and reporting implications
For everyday tax reporting: if savings‑bond interest is taxed on the return, it’s in AGI and thus in most MAGI calculations; if it’s excluded under the education rule, it reduces AGI but may nevertheless be “added back” for certain federal program MAGI computations (ACA, Social Security tests), so taxpayers must check the precise MAGI definition for the program in question rather than assume one universal treatment (TreasuryDirect; H&R Block; TurboTax; TaxNotes) [2] [8] [9] [4].
6. Where reporting and guidance leave gaps
Public guidance shows the pattern but also the gaps: many tax‑prep and advisory sources note that not all MAGI calculations add back excludable savings‑bond interest (H&R Block’s MAGI explainer), while other authoritative analyses (CRS, IRS instructions for specific forms) show program‑specific add‑backs — published guidance must be checked for the specific MAGI use‑case [10] [5] [3].