If you have children under age 17 you can save up to $600 per child per year, thanks to a child tax credit. Credits reduce your tax bill, dollar for dollar, so a family with three kids might lop $1,800 of their tax bill.
The catch: you can’t take the credit if you earn “too much.” If your joint income exceeds $110,000, you lose $50 of credit for each extra $1,000 you earn. Thus, with two eligible children, you’ll get no credit if your income tops $133,000 of income; with four children, you’ll get some credit with as much as $157,000 of income.
If your income is subject to a phaseout, cutting your gross income will increase your credits. You can sell stocks at a loss, taking deduction up to $3,000, and you should maximize contributions to your retirement plan. A stay-at-home spouse can reduce joint income by $3,000 ($3,500 over age 50) with a deductible contribution to an IRA, as long as family income is under $150,000.
