44 KIPLINGER’S PERSONAL FINANCE^ 03/2020MONEY
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(^2 )could end up paying more to the IRS
than you should.
The tax code is particularly wel-
coming for parents, even if they don’t
itemize. For example, if you became
a parent last year, you’ll be eligible for
a $2,000 tax credit. Unlike a deduc-
tion, which reduces the amount of
income the government gets to tax, a
credit reduces your tax bill dollar for
dollar. The credit begins to disappear
as income rises above $400,000 on
joint returns and above $200,000
on single and head-of-household
returns—although there’s no limit
to how many kids you may claim on
a return, as long as they qualify.
You may also qualify for a tax credit
that will reduce the cost of child care.
If your children are younger than 13,
you’re eligible for a credit of 20% to
35% for up to $3,000 in child-careexpenses for one child or $6,000 for
two or more. The percentage de-
creases as income increases. Eligible
expenses include the cost of a nanny,
preschool, before- or after-school care,
and summer day camp.
Once the kids start college, make
sure you take advantage of tax breaks
designed to offset the rising cost of
higher education. The American Op-
portunity tax credit, which you can
claim for students who are in their
first four years of undergraduate
study, is worth up to $2,500 for each
qualifying student. You don’t have to
itemize to claim the credit. Married
couples filing jointly with modified
adjusted gross income (MAGI) of up
to $160,000 can claim the full credit;
those with MAGI of up to $180,000
can claim a partial amount.
Unlike the American Opportunitycredit, the Lifetime Learning credit
isn’t limited to undergraduate ex-
penses, and you don’t have to be
a full-time student to claim it. The
credit is worth up to 20% of your
out-of-pocket costs for tuition, fees
and books, up to a maximum of
$2,000. Married couples filing jointly
with MAGI of up to $116,000 can
claim the full credit; those with MAGI
of up to $136,000 can claim a partial
credit.
Non-itemizers may also be eligible
for several “above the line” deduc-
tions. In addition to lowering your
taxes—if you’re in the 24% tax bracket,
for example, $1,000 in above-the-line
deductions will save you $240—these
deductions will shrink your adjusted
gross income, which could make you
eligible for other tax breaks.
One of the most popular above-the-■ THE TAX
CODE PROVIDES
SEVERAL BREAKS
FOR PARENTS
OF COLLEGE
STUDENTS.