Many Americans are paying more in taxes than necessary, with households forfeiting billions of dollars in federal tax credits each year. The issue stems from a lack of awareness about available programs or assumptions that they do not qualify.
Unlike deductions, which reduce taxable income, credits lower the tax bill directly. At a time when household budgets are tight, this represents a significant financial loss.
Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center, told CNBC that the earned income tax credit and additional child tax credit combined are often considered the largest financial event of a low-income family's year. The IRS estimates approximately one in five eligible taxpayers misses out on claiming the EITC.
Eligibility for the EITC depends on income, filing status, and the number of qualifying children. For 2025, the credit ranges from $649 for filers without children to just over $8,000 for workers with three or more qualifying children. Adjusted gross income limits reach as high as $61,555 for single filers and $68,675 for married couples filing jointly.
The additional child tax credit is a refundable portion that can provide up to $1,700 per qualifying child depending on income.
Another frequently missed opportunity is the Saver's Credit, which rewards workers for contributing to retirement accounts. It applies to contributions made to traditional and Roth IRAs, 401(k)s, 403(b)s, and similar workplace plans.
For 2025, single filers can qualify with a modified adjusted gross income of up to $39,500, and married couples filing jointly can qualify up to $79,000 if both spouses contribute. The credit can cover as much as 50% of a contribution, capped at $1,000 for single taxpayers and $2,000 for couples.
Many families also overlook the Child and Dependent Care Credit. The IRS allows the credit for a wide range of care-related costs, including childcare needed for work or job searching, after-school programs, and summer day camps. It also applies to the care of a dependent who cannot care for themselves.
Depending on income, the CDCC covers between 20% and 35% of up to $3,000 in eligible expenses for one qualifying person, or up to $6,000 for two or more. There is no upper income limit that completely disqualifies a taxpayer, but the percentage drops to 20% at higher incomes.
Adults returning to school or changing careers may bypass the Lifetime Learning Credit. This nonrefundable credit is worth 20% of up to $10,000 of qualified tuition and required fees per return, with a maximum of $2,000. It is available for undergraduate, graduate, and professional degree coursework.
Income-based phase-outs for the Lifetime Learning Credit start at a modified adjusted gross income of $80,000 for single filers and $160,000 for joint filers.
Homeowners may be missing the Energy Efficient Home Improvement Credit, which expires after 2025. It allows a credit equal to 30% of qualifying energy efficiency upgrades and home energy audits. The annual maximum credit is $3,200.