What Can I Subtract From My Tax?

After you have figured your tax, you may be able to subtract certain amounts from it. These amounts are called credits. They reduce your tax "dollar for dollar."

Higher education tax credits. You may be able to claim one of two education tax credits.

1. The Hope credit.
2. The lifetime learning credit.

The amount of each credit is determined by the amount you pay for qualified tuition and related expenses and the amount of your modified adjusted gross income.

What expenses qualify. The credits are based on qualified tuition and related expenses you pay for yourself or dependent you claim on your tax return. In general, qualified tuition and related expenses are tuition and fees required for enrollment or attendance at an eligible educational institution. Fees for course-related books, supplies and equipment, and student activity fees are included in qualified tuition and related expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Qualified tuition and related expenses do not include the cost of insurance, medical expenses (including student health fees), room and board, transportation, or similar personal, living or family expenses, even if the fee must be paid to the institution as a condition of enrollment or attendance. For more information, see Publication 970, Tax Benefits for Higher Education.

Child tax credit. If you have children, you may be entitled to a child tax credit for each qualifying child. You must provide the name and identification number (usually the social security number) of each qualifying child on your return. The maximum amount of the credit you may claim is $500 for each qualifying child.

Limit on credit. The credit may be limited depending on the amount of your tax liability and your modified adjusted gross income. See the Form 1040 or 1040A Instructions for more information.

Earned income credit. If you qualify for the earned income credit, you may be able to get a refund from the IRS even if you had no tax withheld. See Publication 596, Earned Income Credit, or the instructions for the tax form you file, to see if you can claim this credit.

You do not have to have a qualifying child to be able to claim the earned income credit in 2000. If you are at least 25 years old, have earned income of less than $10,380, and cannot be claimed as a dependent by another person, you may be eligible for the credit.

Child and dependent care credit. If you have a child and you were employed in 2000, you may be eligible for the child and dependent care credit. See Publication 503, Child and Dependent Care Expenses, for more information.

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