John McGill’s TAX Q&A

Q I have read that a recent change in tax law allows doctors to work after age 65, without reducing their Social Security benefits for the amount of income earned. I’ll be 65 next year, and I would prefer to delay receiving Social Security benefits until I plan to quit practicing at age 70, since I will be in a lower tax bracket. Will I be compensated for delaying drawing my Social Security benefits?

A Yes, the recent tax law change to which you refer now allows doctors age 65 or older to receive full Social Security benefits, regardless of their income. Doctors age 62 through 64 who elect to begin receiving benefits early are still subject to a reduction in their benefits for the amount of their annual earnings.

In your situation, you would be entitled to a retirement credit (increased benefits) if you elect to delay receiving Social Security benefits until age 70. Under current law, the credit increases your Social Security benefits by a percentage that ranges from 3% to 8% a year, depending on your year of birth. No additional credit would be given for receiving Social Security benefits after age 69.

Q I am looking for creative ways to pay for my children’s college educational expenses. Inflation-Indexed U.S. Savings Bonds, or “I” Bonds, look like a good way to save for their education. If I redeem the bonds to pay college tuition, will I be taxed on the accumulated interest income?

A Under current law, series I or EE bond interest spent for post-secondary school tuition and fees (excluding room and board) isn’t taxable if your adjusted gross income, married and filing jointly, is less than $81,100. If your adjusted gross income is between $81,100 and $111,100, part of the interest income is excluded.

The interest exclusion also applies if the bond proceeds are contributed to a state tuition (Section 529) plan or to an education IRA. However, you cannot offset bond interest from college expenses covered by tax-free grants, a Hope Scholarship, or by lifetime learning credits.