Last year we were able to use the education tax credit, and that resulted in a $4K credit, which put us close to break even on taxes withheld and taxes owed. This year we made $13K over the income limit that determines qualification, which means our we can't use the $4K tax credit (we made an extra $13K, and our actual taxes went up by $4K. Not even the highest tax bracket in America sees that % in tax increase year over year).
Is there anything we can do to reduce our income for 2019 from $173K to $160K? Can we purchase IRAs? Married filing jointly, both over 50 in 2019.
While you don’t get the full credit with income over $160,000 you do get some credit.
Regarding the IRA, you can each contribute $7,000. Whether the contribution will be an adjustment to income depends on whether you have a retirement plan at work. You can put the contributions into Turbotax and see the effect on your tax situation.
I just entered the information for wife and daughter. Both had 1098-T forms. Neither one lowered my taxes, in fact they went up because of the scholarship my wife got. I think $160K is a hard cutoff, you get zero tax benefit for paying for college for anyone in the family. We are seriously paying and additional $4K in taxes on $13K of additional income.