Dan Adkins, 606-257-1754

The first item is a $400-per-child tax credit for all dependent children under age 17. "This credit can be applied to a son, daughter, stepchild, foster child and even a grandchild if the taxpayer can claim the child as a dependent," says Pope.

Next year, this credit will look even better, when the amount of tax savings rises to $500, he notes.

The child tax credit was written into the nation's tax laws in a 1997 bill. However, Congress wrote the law so the tax break wouldn't apply to that year's taxes. It does apply to 1998's taxes, though, and taxpayers should be alert to it, Pope emphasizes.

The 1997 law also provides two other tax credits that parents should consider. Both involve tax breaks applicable to college-attending dependents.

The Hope Scholarship tax credit allows taxpayers to recoup up to $1,500 on college tuition and fees, Pope says. The law provides a clear $1,000 credit on the first $1,000 in tuition and fees. It also allows 50 percent of the next $1,000. However, taxpayers are restricted to using this credit only for tuition and fees for the first two years of college.

The third tax break is the Lifetime Learning credit. This credit can be applied to college costs of third- and fourth-year students, graduate students and professional-degree students.

Pope says the Lifetime Learning credit is equal to 20 percent of the qualified tuition and fees, and, for 1998, is effective only on those payments that were made after July 1, 1998.

Taxpayers should be aware that the law includes provisions setting income levels where each of these credits are phased out and become unavailable. These phase-outs are:

• Child credit: Reduction in the value of the credit kicks in for single taxpayers earning more than $75,000 and for married taxpayers who earn more than $110,000. The phase-out trims $50 for each $1,000 of income exceeding the phase-out point.
• Hope Scholarship and Lifetime Learning: These credits lose value for single taxpayers who earn $40,000 and are eliminated for those earning $50,000.

Pope notes that taxpayers also should know that for the first time, they can deduct up to $1,000 in interest on student loans.

"Prior to this year, you could only deduct interest on mortgages or investment interest," he says.

The deduction for student-loan interest will rise to $1,500 next year and to $2,500 the following year. But Pope notes this deduction, like the credits, includes phase-out provisions.

"The phase-out begins for singles who make more than $55,000 and for married couples earning $75,000," Pope says.