Are You Taking All of the Tax Credits You Can?

You probably pay close attention to income tax deductions, but are you as careful with tax credits?

Have you filed your 2025 taxes already? If so, congratulations. There were so many changes in the tax code this year that it may have taken longer than usual. We hope you were able to easily meet your tax obligation.

Deductions and credits are key to making that happen, of course. The more of them you can take to offset your income, the less you’ll owe. You’re probably more familiar with deductions. Do you have a mortgage or make charitable contributions? Were your medical expenses high? Do you have children living with you? You know you can get breaks for those things and more. 

But what about credits? Could you name five of them off the top of your head? In case not, we’re going to go over the most common ones this month.

What Is a Credit?

Tax credits are dollar-for-dollar amounts that you can claim on your income tax return to reduce your tax bill. Some are refundable, which means you can claim them even if you don’t owe taxes or don’t have income. So even if you’re not required to file, you can still do so just to get these credits.

There are also non-refundable tax credits. Once you get to a zero tax liability, you can’t apply these credits to your return. So, these credits can reduce the tax you owe, but they can’t contribute to a refund.

Earned Income Tax Credit

This refundable tax credit is typically claimed by moderate-and low-income taxpayers, many of whom don’t take advantage of it. There are numerous workers who are eligible but don’t know it or don’t file. These include grandparents raising grandchildren, veterans, the self-employed, and those living in rural areas. You can find more information from the IRS here. 

Child Tax Credit and Child and Dependent Care Tax Credit

The Child Tax Credit is a nonrefundable tax credit that applies if a child is:

• A U.S. citizen under age 17, 
• In possession of a Social Security number, and,
• Able to be claimed as a dependent on the taxpayer's tax return.

Schedule 8812, Credits for Qualifying Children and Other Dependents

Not all dependents are children. Those not eligible for the Child Tax Credit may be able to be claimed by the taxpayer through the credit for other dependents.

If a taxpayer paid someone to care for their child, spouse, or dependent so they could work, be a full-time student, or look for work, they might be eligible for the Child and Dependent Care Credit.

American Opportunity Tax Credit

This credit is partially refundable. It applies to qualified education expenses paid by or on behalf of an eligible student during the first four years of higher education. To be eligible for the full credit, the taxpayer's income must be $80,000 or less ($160,000 or less for married filing jointly). It phases out completely if the taxpayer has an income over $90,000 ($180,000 for joint filers). Partial refunds are available depending on the taxpayer’s total obligation. Publication 970 covers this in detail. 

Retirement Savings Contributions Credit (Saver’s Credit)

Are you saving for retirement? This credit has many rules, but you should definitely see if you’re eligible. You must be 18 or older, not claimed as a dependent on anyone’s return, and not a student. Depending on the AGI you report on your Form 1040, the amount of the credit can be 50%, 20%, or 10% of contributions you make. It applies to traditional or Roth IRAs and numerous other types of contributions, like elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan. You would fill out a Form 8880, Credit for Qualified Retirement Savings Contributions.

Form 8880, Credit for Qualified Retirement Savings Contributions

Education credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)

If you pay for higher education, you may be eligible for these two credits. You can check your eligibility here.

Home Energy Tax Credits

Unfortunately, these credits, originally slated to run through 2032, expired December 31, 2025. But if you haven’t finished your 2025 taxes yet and you made energy improvements to your home last year, you may qualify for tax credits that would allow you to claim a portion of qualifying expenses. These improvements must have been made to a home you use as a primary residence.

The Energy Efficient Home Improvement Credit covers additions like exterior doors and windows, insulation, central air conditioners, and furnaces. The Residential Clean Energy Credit applies to expenses for energy-saving improvements like solar, wind, and geothermal power generation. The credits allow you to take a percentage of the total improvement expenses in the year of installation. You can get more information from the U.S. Department of Energy site.

We hope you’ve filed your taxes for 2025 already and that your tax obligation was manageable. If not, you might explore these credits to see whether you can whittle it down some. It’s a busy time of year for us, of course, but if you need help, contact our office to see if we can accommodate you.