Individual taxpayers can lower their federal tax liability by up to $2,000 through lesser-known tax credits, including the Earned Income Tax Credit, Child Tax Credit, and others often overlooked during filing. These credits are available to qualifying households and may result in significant refunds or reduced payments.
- The Earned Income Tax Credit (EITC) can provide up to $7,430 for qualifying low-income workers with children.
- The Child Tax Credit (CTC) offers up to $2,000 per qualifying child, with $1,600 refundable.
- The Saver’s Credit provides up to $1,000 for retirement contributions by low-income taxpayers.
- The American Opportunity Tax Credit (AOTC) covers up to $2,500 per student for undergraduate education.
- The Lifetime Learning Credit offers up to $2,000 annually for graduate and vocational courses.
- Over $10 billion in unclaimed credits were left behind in 2023, according to IRS estimates.
Millions of U.S. taxpayers may be leaving money on the table by failing to claim tax credits that are both available and underutilized. The IRS estimates that over 20 million eligible individuals did not claim the Earned Income Tax Credit (EITC) in 2023, a credit worth up to $7,430 for qualifying low-to-moderate-income workers with children. Similarly, the Child Tax Credit (CTC), now worth up to $2,000 per qualifying child under age 17, is frequently underclaimed due to misinterpretation of income thresholds or filing status rules. Other overlooked opportunities include the Saver’s Credit, which offers up to $1,000 in tax relief for contributions to retirement accounts like IRAs or 401(k)s by low-income earners, and the American Opportunity Tax Credit (AOTC), which provides up to $2,500 per eligible student for qualified education expenses during the first four years of college. The Lifetime Learning Credit, though not refundable, offers up to $2,000 annually for graduate or vocational coursework. These credits are not only accessible but also refundable in some cases—meaning taxpayers can receive the full credit amount even if it exceeds their tax liability. For example, the EITC and CTC can result in direct refunds, with the CTC’s refundable portion capped at $1,600 per child. Taxpayers with multiple dependents or those enrolled in higher education may benefit disproportionately. Filing accurately and proactively can lead to immediate financial gains. The IRS reports that over $10 billion in unclaimed credits were left behind in 2023 alone. Individuals who missed these credits may still file amended returns within three years of the original deadline to claim them. Financial advisors recommend using IRS tools like the EITC Assistant or the Interactive Tax Assistant to determine eligibility and maximize savings.