Tax Credits

Make it a practice to take advantage of every tax credit and deduction available to you. Credits provide a dollar-for-dollar reduction in income tax liability; that is, a $1,000 credit actually saves you $1,000 in taxes.

Deductions, on the other hand, lower your taxable income. For example, if you are in the 22% tax bracket, a $1,000 deduction saves you $220 in tax, which is $780 less than the savings with a $1,000 tax credit.

Child Tax Credits

Parents with dependent children under age 17 are entitled to claim a tax credit of up to $2,000 and up to $1,400 can be refundable through 2019.

The credit starts to phase out for taxpayers with adjusted gross income (AGI) of more than $200,000 for single filers and $400,000 for joint filers.

Those who adopt a child can receive a tax credit of up to $14,080 in 2019. Those adopting a child with special needs may claim a $14,080 tax credit in the year the adoption is completed, even if they do not have qualified adoption expenses.

Both of these credits are subject to phase out depending on your income level. To see if you qualify, see below:

Provision Single Married Filing Jointly

Child Tax Credit1

Starts at $200,000 AGI2

Starts at $400,000 AGI2

Adoption Credit

$211,160 - $251,160 AGI

Same as single

Interest on Education Loans

$70,000 - $85,000 AGI

$140,000 - $170,000 AGI

Education Tax Credits
(a) Hope Scholarship Credit
(b) Lifetime Learning Credit

(a) Starts at $80,000 AGI
(b) Starts at $58,000 AGI

(a) Starts at $160,000 AGI
(b) Starts at $116,000 AGI

Coverdell Education Savings Accounts

$95,000 - $110,000 AGI

$190,000 - $220,000 AGI

Education Savings Bonds

$81,100 - $96,100 AGI

$121,600 - $151,600 AGI

Individual Retirement Accounts (IRAs)
Active participants in another plan $64,000 - $74,000 AGI $103,000 - $123,000 AGI3
Not an active plan participant No limitations apply $193,000 - $203,000 AGI4
Contributory Roth IRAs $122,000 - $137,000 AGI $193,000 - $203,000 AGI

1. The credit is reduced by $50 for each $1,000, or fraction thereof, of AGI above the threshold.

2. AGI is adjusted gross income. Different modifications may apply depending on the specific provisions.

3. Applies when both spouses are active plan participants or only the participant spouse contributes.

4. Applies if at least one spouse is not an active participant.