At this point on your tax return you have reported your income and deducted your own exemption and those for dependents. You also have reported adjustments for which you qualified, and either the standard deduction or the total of your itemized deductions. Then you used the net taxable income figure to calculate, from either the tax tables or the tax rate schedules, your tax liability.

Now you get another shot at reducing that tax bill -- this time directly, by way of a series of tax credits. Instead of reducing the number of dollars on which tax is calculated, any credit for which you qualify gives you a dollar-for-dollar reduction in the tax itself.

The accompanying table, "Claiming Tax Credits," tells you where to enter each credit, and lists the applicable IRS publication if you want more information. The same rule applies here as on the other tables: If either of the short tax forms is not listed, it may not be used to claim that credit.

The list of credits is shorter this year; both the investment tax credit and the credit for political contributions have been eliminated. While you may not be happy about the loss of either of these tax credits, their termination represents one of the few ways the income tax process has actually been "simplified."

Child and Dependent Care This tax credit continues unchanged from previous years. If you incurred expenses in 1987 for the care of another to make it possible for you to work (or to seek work), you may be entitled to a credit for part of those expenses.

To qualify, you must meet these rules and attach Form 2441 to your return:

You must have maintained a home of your own during 1987, and the qualifying individual for whose care you claim the credit must have been a member of your household. The expenses must have been incurred for care of a child under age 15 or for a spouse or dependent incapable of self-care. The person for whom the care was provided must have been your dependent or someone you could claim as a dependent except that he or she had income of $1,900 or more. (In the case of divorced or legally separated parents, if you are the custodial parent and have waived the right to claim the dependent exemption for a minor child, that child may still be considered a "dependent" for the purpose of qualifying for this credit.) The care must have been necessary to permit you to be employed for pay or to search for work. In the case of a married couple, both spouses must have been employed or seeking work during the period for which the credit is claimed.

However, if one spouse was incapable of self-care or was a full-time student, you may consider that he or she was "employed" with "earned income" of $200 a month if you are claiming the expenses of caring for one person, or $400 a month for two or more. This assumed income should not be added to your adjusted gross income (AGI) to determine the allowable percentage to be applied to expenses.

This special rule operates on a month-by-month basis. The assumption of earned income may be used only for those months in which the nonworking spouse was either a full-time student or incapable of self-care.

You may apply the rule to either spouse each month, but only to one spouse in any month. Thus, at least one spouse must have been employed (or self-employed) each month, with earned income at least equal to whichever of the two assumed amounts applies.

If you were married during 1987, you must file a joint return to claim the credit. However, if you file a separate return, you may be eligible if you meet these tests: You were legally separated or living apart from your husband or wife. Your spouse was not a member of your household during at least the last six months of 1987. You paid more than half the cost of maintaining a home in 1987 that was also the principal home of the qualifying individual for more than half the year.

If you were single, the amount of expenses you may take into account for computing the credit may not exceed the amount of your earned income for the year.

For married taxpayers filing jointly, the amount of expenses claimed may not be greater than the earned income of whichever spouse earned less (including the assumed income explained above, if applicable).

If your 1987 adjusted gross income was $10,000 or less, the tax credit you may claim is equal to 30 percent of qualifying expenses, up to a specified ceiling. The rate is reduced by one percentage point for each $2,000 (or fraction) of your AGI above $10,000. When your AGI reaches $28,000, the credit levels out at 20 percent for all remaining taxpayers, with no income cutoff.

The "specified ceiling" on expenses mentioned above is $2,400 for the care of one individual and $4,800 for two or more -- which translates, at the $10,000 income level, to a maximum credit of $720 and $1,440, respectively. Because the percentage of expenses that may be claimed drops as income rises, the actual credit ceiling drops accordingly.

The accompanying table shows the percent of qualifying expenses you may deduct and the corresponding credit ceiling for one or more dependents for each AGI level.

The credit is normally allowed only for care in the home actually paid (not just incurred) in 1987. But care outside the home -- baby-sitting service, nursery school, a day-care center, even a summer camp if the other conditions are met -- may qualify in the case of a child under age 15. (In 1988, this credit may not be claimed for expenses incurred to send a child to an overnight camp.)

In some circumstances, you may have a choice: The cost of nursing care for a disabled dependent may qualify either for this tax credit or as a medical deduction on Schedule A. You cannot claim both the credit and the deduction for the same expense, but you may select whichever method gives you the greater tax benefit.

You should claim the tax credit if you are using the standard deduction, or if you are itemizing but don't have much else in the way of medical deductions. But if you itemize and your medical expenses already equal or exceed the 7.5 percent exclusion, then the choice depends on your tax bracket. Work it out both ways to see which gives you the larger tax saving.

Credit for Elderly, Disabled

The 1987 special tax credit for those who are elderly or disabled is unchanged from the 1986 rules. To qualify for this credit, which is claimed on Schedule R, you must meet either one of these two tests:

You were 65 or older on Dec. 31, 1987, and had taxable income of any kind during the year. You were under age 65 on that date, you retired because of permanent total disability and you received taxable disability pay during 1987. (If you retired on any degree of disability before 1977, you qualify if you were permanently and totally disabled on either Jan. 1, 1976, or Jan. 1, 1977.)

In addition, you must be a citizen or resident of the United States; if married, you must file a joint return to claim the credit (unless you're filing a separate return and didn't live with your spouse at any time during 1987).

The first step in completing Schedule R is to determine your filing status for claiming the credit -- which is likely to be different from your basic Form 1040 filing status. Review the nine different descriptions carefully, because the box you check has an impact on the amount of allowable credit.

If you claim disability, Part II calls for a signed statement from your physician. However, the statement is not required if you had already filed such a statement with your tax return for 1983 or an earlier year, or if you filed the statement after 1983 and your physician certified that there was no reasonable probability that your condition would improve.

Computations on page 2 of Schedule R start with an initial maximum allowance, which varies with your filing status. From that maximum you must subtract certain nontaxable pension or annuity payments, such as the untaxed portion of Social Security benefits.

There is a further offset of 50 percent of adjusted gross income above specified ceilings, which depend on the status box you checked on page 1. The tax credit is 15 percent of any amount remaining after these deductions; it is claimed on line 41 of Form 1040.

Foreign Tax Credit You may be allowed a credit against U.S. income tax liability for income (or equivalent type) tax paid to a foreign country, if you were a U.S. citizen or a resident for all of 1987.

In lieu of the credit, you may elect to take a deduction on line 7 of Schedule A, under "Taxes You Paid." Generally, however, the credit -- which provides a dollar-for-dollar reduction of U.S. tax -- is preferable; of course, if you take the standard deduction, the tax credit is the only way to go.

You compute the foreign tax credit on Form 1116. For the average taxpayer, the instructions that accompany Form 1116 will provide adequate information. However, there were some changes introduced by the 1986 tax law; if you have substantial overseas investments, you can refer to IRS Publication 514 -- but you probably need professional help.

General Business Credit

Form 1040 provides one line for entering the total of all business credits you may claim. If you are eligible for one or more of these credits, enter the total amount claimed on line 45. Check the applicable box(es) and attach the appropriate supporting forms. If you claim more than one business credit, complete and attach summary Form 3800.

CLAIMING TAX CREDITS

Credit:------------------------Where to report:---IRS Publication:

Child or dependent care--------1040 line 40 and----------------503

...............................Form 2441..........................

...............................1040A line 19 and..................

...............................Schedule 1 Part I..................

Elderly or disabled------------1040 line 41--------------------524

...............................and Schedule R.....................

Foreign tax paid---------------1040 line 44--------------------514

...............................and Form 1116......................

General business---------------1040 line 45--------------------572

...............................and Form 3800......................

Earned income------------------1040 line 56--------------------596

...............................1040A line 21b.....................

Special fuels------------------1040 line 59--------------------378

...............................and Form 4136......................