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Modified adjusted gross income (MAGI). For most taxpayers, MAGI is adjusted gross income (AGI) as fig- ured on their federal income tax return without taking into account this interest exclusion. However, as discussed below, there may be other modifications. Your MAGI is the AGI on line 11 of Form 1040 or 1040-SR figured without taking into account any savings bond interest exclusion and modified by adding back any: 1. Foreign earned income exclusion, 2. Foreign housing exclusion, 3. Foreign housing deduction, 4. Exclusion of income by bona fide residents of Ameri- can Samoa, 5. Exclusion of income by bona fide residents of Puerto Rico, 6. Exclusion for adoption benefits received under an em- ployer's adoption assistance program, and 7. Deduction for student loan interest. Use the worksheet in the instructions for line 9 of Form 8815 to figure your MAGI. If you claim any of the exclusion or deduction items (1)–(6) listed above, add the amount of the exclusion or deduction to the amount on line 5 of the worksheet. Don't add in the deduction for (7) student loan interest, because line 4 of the worksheet already includes this amount. Enter the total on Form 8815, line 9, as your MAGI. Because the deduction for interest expenses at- tributable to royalties and other investments is limited to your net investment income, you can't figure the deduction until you have figured this interest ex- clusion. Therefore, if you had interest expenses attributa- ble to royalties and deductible on Schedule E (Form 1040), Supplemental Income and Loss, you must make a special computation of your deductible interest without re- gard to this exclusion to figure the net royalty income in- cluded in your MAGI. See Royalties included in MAGI un- der Education Savings Bond Program in chapter 1 of Pub. 550. Figuring the Tax-Free Amount If the total you receive when you cash in the bonds isn't more than the adjusted qualified education expenses for the year, all of the interest on the bonds may be tax free. However, if the total you receive when you cash in the bonds is more than the adjusted expenses, only part of the interest may be tax free. To determine the tax-free amount, multiply the interest part of the proceeds by a fraction. The numerator (top part) of the fraction is the adjusted qualified education ex- penses (AQEE) you paid during the year. The denomina- tor (bottom part) of the fraction is the total proceeds you received during the year. CAUTION ! Example. In February 2021, Mark and Joan Washing- ton, a married couple, cashed a qualified series EE U.S. savings bond. They received proceeds of $9,000, repre- senting principal of $6,000 and interest of $3,000. In 2021, they paid $7,650 of their daughter's college tuition. They aren't claiming an American opportunity or lifetime learn- ing credit for those expenses, and their daughter doesn't have any tax-free educational assistance. Their MAGI for 2021 was $80,000. $3,000 interest × $7,650 AQEE = $2,550 tax-free interest $9,000 proceeds They can exclude $2,550 of interest in 2021. They must pay tax on the remaining $450 ($3,000 − $2,550) of inter- est. Effect of the Amount of Your Income on the Amount of Your Exclusion The amount of your interest exclusion is gradually re- duced (phased out) if your MAGI is between $83,200 and $98,200 (between $124,800 and $154,800 if your filing status is married filing jointly). You can’t exclude any of the interest if your MAGI is equal to or more than the up- per limit. The phaseout, if any, is figured for you when you fill out Form 8815. Claiming the Exclusion Use Form 8815 to figure your education savings bond in- terest exclusion. Enter your exclusion on line 3 of Sched- ule B (Form 1040), Interest and Ordinary Dividends. At- tach Form 8815 to your tax return. 10. Employer-Provided Educational Assistance Reminder Educational assistance benefits. Employer-provided educational assistance benefits include payments made after March 27, 2020, and before January 1, 2026, for Page 58 Chapter 10 Employer-Provided Educational Assistance