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tains significant changes to the tax code, did not take effect until the 1998 tax year.
What follows is an attempt to point out some of the provisions most likely to affect the average individual taxpayer. Naturally, you should consult with your tax adviser for a more complete rundown of issues affecting you and your family’s tax situation.
Child Tax Credit
On the surface, the Child Tax Credit sounds straightforward — a $500 nonrefundable tax credit ($400 in 1998) for each qualifying child. In reality, there are major snags.
For married taxpayers, the credit starts to phase out when modified AGI (adjusted gross income) exceeds $110,000. The threshold is $75,000 for single or head of household status and $55,000 for married filing separately.
A more stealthy potential limitation is the extremely complex interaction with AMT (alternative minimum tax). The Child Tax Credit may lower the tax liability to the point where AMT kicks in and the credit is at least partially lost.
Related to the Child Tax Credit are the Additional Child Tax Credit for taxpayers with three or more qualifying children and the Supplemental Child Tax Credit for taxpayers whose Earr\ed Income Credit exceeds 50% of self-employment tax or 100% of the employee’s share of Social Security and Medicare taxes.
Education IRA
Since it generally will not interact with Form 1040, it may be easy to overlook the new Education IRA, which is a nondeductible account set up by an individual for the benefit of a child under age 18.
Only taxpayers with AGI under $150,000 (joint filers) or $95,000 (single filers) may contribute the full $500 per year per child. The earnings accumulate tax-free and distributions for education expenses are also tax-free, provided certain conditions are met.
Student Loan
Interest Deduction
For taxpayers in the first five years of paying off their student loans, the Student Loan Interest Deduction may be a welcome sight on their tax returns this year. The deduction starts at $1,000 in 1998 and gradually increases to $2,500 by the year 2001. As usual, there are AGI limits ($40,000 for single filers and $60,000 for married filers) as
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