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Year End Tax Planning Tips for Families
- Consider shifting income into 2010, if your 2009 income will disqualify you for the child or education credits.
- The child credit ($1,000) phases out for married couples with an AGI of $110,000 ($75,000 for single individuals).
- The Hope education credit (maximum credit of $1,800 is based on 100% of the first $1,200 of tuition and 50% of the next $1,200 of tuition) phases out for married couples with an AGI between $96,000 and $116,000 ($48,000 and $59,000 for single individuals). The Lifetime education credit of $2,000 (20% of the first $10,000 of tuition cost) has the same income phase out rules. In addition to education credits, an education deduction is available up to $4,000. The income phase out for this deduction is $136,000 for married couples.
- Consider a Section 529 Education plan for your child’s education savings. The earnings are tax deferred and the income is tax free if used for educational purposes when withdrawn. Additionally, up to $2,600 of educational loan interest is deductible for 2009. The income phase out limit is $105,000 to $135,000 for the interest deduction for married couples.
- Be careful with regard to marriage or divorce decisions before the end of the year.
- If you provide more than one half of the support for an individual, you may be able to claim that person as a dependent on your return, provided their income does not exceed $3,500. Students under 23 can be claimed even if their income exceeds $3,500.