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This calendar year, you can buy up to a total of $5,000 in paper series I savings bonds with your refund. Any unused amount of your refund can be sent to you in a paper check, or you can elect to have the remaining refund direct deposited into an account of your choice.

Under the new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds of each series in a single calendar year, or a total of $20,000, in single ownership form.

In 1990, Congress created the Education Savings Bond program. Now, all savings bonds issued on or after January 1, 1990, can be redeemed tax-free if the money is used to pay qualified education expenses.

College savings bonds, more commonly known as Federal Savings Bonds, are issued by the Treasury Department and have been given to children for years to start their college savings account. ... When it's time to redeem the bonds to pay for college, you can either cash them in or roll them into a 529 plan (see below).

Bonds are a handy way for the government to generate income to help pay off debts. Most savings bonds are purchased at half of the face value. So, if you have a $200 bond, it was purchased for $100. It should reach its face value of $200 after 20-or-30 years, depending on the type of bond you have.

You can avoid paying taxes on interest earned by Series EE and Series I savings bonds when you redeem them if you use the money toward qualified higher education costs for yourself, your spouse, or any of your dependents.

The bond owner must be at least 24 years of age when the bond is purchased for it to qualify for this program. The bond must be used solely for tuition related expenses, such as lab fees and college courses. The bonds cannot be used to pay for textbooks, room and board, or sports programs.

Who Can Take the Exclusion. You can take the exclusion if all five of the following apply: You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion. You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.

Advantages. Backed by the full faith and credit of the United States government, the interest from these bonds is tax-free if used for qualified higher education expenses. Also, interest on Series EE and I savings bonds is usually exempt from state and local taxes.

Qualified education expenses include only tuition and fees - not room and board. You also can include any contribution you make to a qualified state prepaid tuition program or to a Coverdell education saving account as an educational expense.