ax credits are the best deal in town. Nothing beats a tax credit - not even a deduction. A tax credit is a dollar-for-dollar reduction in your taxes. For example, if you're in the 28 percent tax bracket, a deduction of $100 saves you $28; a credit of $100, no matter what bracket you're in, saves you $100 in taxes.

Let's look at some of the most important tax credits available and how you can use them to reduce your taxes.

Do you work for more than one employer, or did you change jobs during the year? If so, you may have had too much Social Security withheld from your wages.

For 1998, the maximum wage subject to Social Security is $68,400. If you work for more than one employer, each employer will deduct 6.2 percent from your wages for Social Security purposes. But, since you're only liable for a maximum of 6.2 percent, excess Social Security taxes may be withheld from your income. (There is no maximum for the 1.45 percent withheld for Medicare purposes.) These excess payments are credits against your income tax liability.

For example, assume you work for two employers, making $68,400 from each. Each employer will deduct $4,228.40 from your wages for Social Security, for a total of $8,256.80. But you were only supposed to pay the government half of that amount. You get the other $4,228.40 as a credit to reduce your income tax. Any excess over your tax comes back to you as a refund.

The earned income credit is a form of negative income tax. That means that the credit can reduce your taxes below zero and the IRS pays you the difference.

The amount of the credit you can claim depends on whether you have one, more than one, or no qualifying children. For 1998, the parameters of the credit are as below:

No. of Children	Max. Credit	Earned Income Credit	Phaseout Begins	Complete Phaseout
1	$2,271	$6,680	$12,260	$26,473
2 or more	$3,756	$9,390	$12,260	$30,095
None	$341	$4,460	$5,570	$10,030

The earned income amount is the amount of earned income that's allowed and still receives the full credit. The phaseout shows how much income you can earn before the credit begins phasing out, and the final figure shows the annual income at which no credit is allowed.

In order to claim the credit, you must have an eligible child or meet other qualifications. While the qualifications are complicated, they're worth pursuing, especially since the credit is designed to help low-income families where even a few extra dollars can make a substantial difference in living standards.

If you incur expenses in connection with the care of your children under age 13, or your spouse is physically or mentally unable to care for himself or herself, you can get a tax credit for some of these expenses.

The credit is a percent of those qualifying expenses. It ranges from 30 percent if your income is not more than $10,000 to 20 percent if your income is $28,000 or more. The amount of qualifying expenses is capped at $2,400 for one child or $4,800 for two or more. This means the maximum credit for a family with two or more children is $960 ($4,800 x 0.20).

While this credit isn't refundable, the definition of qualified expenses makes this a credit to be enjoyed. Not only do direct child care expenses such as day care or even babysitting qualify, but indirect expenses qualify as well. For example, if I hire a cleaning service to clean my house so my wife can work (or go to school for five months in the tax year), the cost of that cleaning service is a qualifying expense. Give your spouse a reason to smile - hire someone to clean your house and get the IRS to help pay for it.

If you have a dependent care program at work, where dollars are deducted from your compensation for child care expenses, those dollars reduce your qualifying expenses. For example, if I reduce my wages by $2,000 for my dependent care program, that $2,000 reduces my qualified expense maximums to $400 for one child or $2,800 for more than one ($2,400 -$2,000 or $4,800 - $2,000).

If you're in a tax bracket higher than 20 percent, putting these dollars in a dependent care program usually saves you more money than taking the credit directly. The program's dollars aren't taxed, but you lose them if you don't spend them. Check with your employer to see if a program exists. If it doesn't, get one created.

Starting in 1998, you may be eligible for a tax credit for each of your children under age 17. This credit will be $400 in 1998 and $500 for 1999 and beyond. A child is eligible if he or she can be claimed as a dependent and is your son, daughter, direct descendent, step- or foster child.

The amount of your credit is reduced beginning at income levels of $110,000 for joint returns ($75,000 for individuals and $55,000 for married couples filing separately), and is phased out as your income rises above that amount.

If you qualify for both the child tax credit and the earned income credit, a complicated formula allows some people with three or more qualifying children to receive a refund. You receive a part of any payroll taxes paid if the sum of the two credits exceeds your regular tax liability.

The Taxpayer Relief Act of 1997 created two new higher education tax credits. You can claim a nonrefundable Hope Scholarship tax credit for qualified tuition and fees (but not for the cost of room and board or books) for the first two years of post-secondary education in a degree or certificate program. For these two years, you can take a dollar-for-dollar credit on the first $1,000 and 50 percent of the next $1,000 of qualified expenses, for a potential total credit of $1,500.

The credit is available for the tax year in which the expenses are paid, as long as the education begins or continues during that year or begins within three months of the next year. Once you have completed the first two years, the Hope credit is no longer available.

But then you can take the Lifetime Learning Credit. This credit applies to expenses paid after June 30, 1998, for education furnished after that date. You can't take the Lifetime Learning Credit in any year you qualify for the Hope.

The Lifetime Learning Credit allows you to claim a credit on up to 20 percent of $5,000 ($10,000 for tax years beginning in 2003) of qualified tuition or fees paid during the tax year (again, the cost of room and board or books does not qualify).

Unlike the Hope, the Lifetime credit may be claimed for an unlimited number of years and may be used for graduate or other professional degree programs.

Both of the education credits phase out for individuals with incomes between $40,000 and $50,000 ($80,000 and $100,000 for joint returns). Between the two credits, over a four-year period you can claim credits of $5,000 ($1,500 each for years one and two, and $1,000 each for years three and four).

If you're a dependent student, you may not claim either credit on your own return. Parents who claim you as a dependent claim the credit on their own return. However, if you're the parent and your income is sufficiently high, you may lose the dependency exemptions for your children as well as eligibility for these credits. In that case, it may be financially prudent to emancipate your children, allow them their own dependency exemption, and allow them to qualify for the above credits.

You're allowed a maximum non-refundable credit for qualified adoption expenses of $5,000 per child ($6,000 in the case of special needs adoptions). Qualified adoption expenses are reasonable and necessary adoption fees, court costs, attorney's fees, and other expenses directly related to the legal adoption of a child under 18 or one who is physically or mentally incapable of caring for himself or herself.

This credit phases out for taxpayers with incomes between $75,000 and $115,000.

It may seem obvious, but don't forget to claim all of your withholdings. Most people have little trouble reporting the withholdings on their W-2s, but many people fail to claim any withholdings on dividends or interest income. In special circumstances, such withholdings are required and are reported on your 1099 forms.

Don't forget these credits. It's your money. You should want it back.