Tax Strategies - Minimize Income To Maximize Tax Credits

Minimizing or deferring one's taxes can be a part of a wealth building plan. I like qualifying for tax credits because a credit is a dollar for dollar reduction in one's taxes. There are a number of tax credits that phase out and are completely eliminated at certain income limits. By planning ahead, sometimes one can manage Modified Adjusted Gross Income (MAGI) and qualify for a tax credit. For example, managing one's future income can be done by accelerating or delaying capital gains, or making deductible retirement contributions.

Here are some of the tax credits in which I am interested and the MAGI limits for phase out and elimination.

	Tax Credit - Qualifications for Married Filing Jointly
Tax Credit	Maximum Credit	MAGI for 100% Credit	MAGI for Full Phase Out of Credit
Adoption	$10,960 per adoption	$164,410	$204,410
Child	$1,000 per child	$110,000	$110,000 + $20,000 per child
Retirement	$1000 per person	$30,000	$50,000

It's too late to do anything for the 2006 tax year. However, if one expects to be close to the MAGI limits for the 2007 tax year, action still can be taken to be below the limit.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

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