1. You pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return.
2. Your modified adjusted gross income (MAGI) is less than $73,500 ($117,750 if filing a joint return).
3. Your filing status is not married filing separately.

Qualified U.S. savings bonds:

A qualified U.S. savings bond is a series EE bond issued after 1989 or a series I bond. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners). The owner must be at least 24 years old before the bond’s issue date. The issue date is printed on the front of the savings bond.

Qualified education expenses:

These include the following items you pay for either yourself, your spouse, or a dependent for whom you claim an exemption.

• Tuition and fees required to enroll at or attend an eligible educational institution. Qualified education expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program.
• Contributions to a qualified tuition program (QTP).
• Contributions to a Coverdell education savings account (ESA), formerly known as an education IRA

Claiming the Exclusion:

Use Form 8815 to figure your education savings bond interest exclusion. Enter your exclusion on line 3 of Schedule B (Form 1040), Interest and Ordinary Dividends, or Schedule 1 (Form 1040A), Interest and Ordinary Dividends for Form 1040A Filers. Attach Form 8815 to your tax return.

See Education Tax Breaks