Your precious darlings are now worth a bit more to you. Since 1998 you can claim a child tax credit of $400 for each child under 17, increasing to $500 in 1999. The credit applies to your children, grandchildren, step children and foster children.
The credit begins to disappear once you income exceeds $75,000 ($110,000 on a joint return), and it is eliminated when your income exceeds $84,000 ($119,000 on a joint return).
Divorce Planning Tips for the child tax credit:
The child tax credit is available only if you claim the exemption for the child. Thus, the exemption is worth $500 a year more as a bargaining chip in divorce negotiations.
Divorcing parents should pay special attention to the phase-out rules. If one parent's income is over $75,000, he won't enjoy the full child tax credit. Thus, it may save income taxes to award the exemption to the lower-earning spouse.
here are three new tax-saving schemes for those paying education expenses for themselves or their children.
Educational IRAs. Parents can now contribute up to $500 a year to educational IRAs for children under 18. No deduction allowed for the contribution, but the IRA earnings are tax-free if used for higher education. Contributions for each child are limited to $500 a year, and only parents with income of $95,000 or less ($150,000 on a joint return) may make the full contribution. If both parents qualify, divorced parents will have to agree whether each parent will contribute $250, or one parent will contribute the full $500.
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For more information, contact the Family Law Offices of Renee M. Marcelle at (415) 456-4444, or online at http://www.familylawmarin.com/--