In 2013, Harry and Mary purchased Series EE bonds, and in 2017 redeemed the bonds, receiving $500 of interest and $1,500 of principal. Their income from other sources totaled $30,000. They paid $2,200 in tuition and fees for their dependent daughter. Their daughter is a qualified student at State University.
a. How much of the Series EE bond interest is excludable?
b. Assuming that the daughter received a $1,000 scholarship, how much of the interest is excludable? Ignore any tax credits that might be available.
c. Assuming the daughter received the $1,000 scholarship and that the parents’ income from other sources is $122,750, how much of the interest is excludable?