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Year End Tax Planning Tips for Families

  1. Consider shifting income into 2010, if your 2009 income will disqualify you for the child or education credits.
    1. The child credit ($1,000) phases out for married couples with an AGI of $110,000 ($75,000 for single individuals).
    2. 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.
  2. 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 The earnings are tax deferred and the income is tax free if used for educational purposes when withdrawn.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.
  3. Be careful with regard to marriage or divorce decisions before the end of the year.
  4. 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.