Tax credits, like the Child Tax Credit worth up to $2,000 per qualifying child, offer significant savings by directly reducing tax liability. Unlike tax deductions, which decrease taxable income based on one's tax bracket, credits reduce the tax bill dollar-for-dollar. However, eligibility for the Child Tax Credit can change if a child ages out (turns 17) or if income exceeds certain thresholds ($200,000 for single filers, $400,000 for joint filers), resulting in a phased-out credit. To mitigate the loss of such credits, taxpayers can increase contributions to traditional IRAs, 401(k)s, HSAs, and charitable donations, or seek professional tax advice for additional strategies.
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