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Child Tax Credit
The Child Tax Credit allows you to reduce your
federal income tax by $1,000 for each qualifying child
under the age of 17. This credit begins to phase out if
your modified AGI is above $110,000 for joint filers, or
$75,000 for single or head of household filers.
Dependent care credit
Parents who
must pay for the care of a dependent under age 13 in
order to work may be eligible for a tax credit of
between 20 percent and 35 percent of qualifying
expenses. For 2007, the maximum amount of expenses on
which the credit can be claimed is $3,000 for the care
of one dependent or $6,000 for two or more.
Education tax credits
Two popular
credits can help defray the cost of higher education.
The Hope Credit, worth up to $1,650 for each qualifying
student, is available for each of the first two years of
college. A Lifetime Learning Credit of up to $2,000 per
year is available for undergraduate, graduate and
professional degree courses. Both credits are phased out
once modified AGI surpasses $94,000 for joint filers and
$47,000 for single filers. You cannot claim both credits
for the same student in the same tax year.
529 Plans
The tax benefits of 529 college savings plans, which
were to expire in 2010, are now a permanent part of the
tax code. These plans give parents and other relatives a
tax-advantaged way to save money for higher education
expenses. Funds in the account grow tax-free and
withdrawals also are tax-free if they are used to pay
for qualified educational expenses.
» Next:
Tax Consideration
for Investors
This article was provided by the American Institute of Certified Public Accountants (AICPA).
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