The 2025 tax season is in full bloom, and the IRS will soon be sending tax refunds to all of those extra early tax filers. It's great to file your tax return as soon as you can, but it's also important to carefully review all of the potential tax credits you could claim to lower your tax bill or increase the amount of money you get back.
Tax credits directly reduce the federal income taxes that you owe, and they can be awarded to families with children, students with educational expenses, people with medical expenses or investors who put money in special tax-advantaged accounts.
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Learn about all the potential tax credits this year to maximize your tax refund. For more tax tips, see all the ways that your house can give you tax breaks and learn whether or not you need to pay taxes on your Social Security checks.
How do federal tax credits work?
Tax credits directly subtract money from the federal income taxes that you owe, meaning each dollar in tax credits you receive is a dollar that you save in taxes. Tax deductions, on the other hand, reduce your amount of taxable income, which lowers your tax bill indirectly.
For example, a single tax filer earning $75,000 in 2024 and taking the $14,600 standard deduction -- or $60,400 taxable income -- will pay about $13,288 in federal income taxes. A $1,000 tax credit is direct savings that would reduce their total taxes to $12,288.
A $1,000 tax deduction would lower their taxable income from $60,400 to $59,400. At the expected tax rate of 22%, that deduction would result in $220 of tax savings, reducing the total tax bill to $13,068, or $780 less savings than if the deduction were a tax credit.
Important: You don't need to itemize deductions to claim tax credits.
Tax credits are classified as either nonrefundable, fully refundable or partially refundable.
Nonrefundable tax credits can only be used against taxes that you owe -- once your tax bill hits $0, you don't get the additional money. Fully refundable tax credits are just the opposite -- if your refundable tax credits are more than the income taxes that you owe, you will receive the extra amount back in a tax refund.
Partially refundable credits let you claim a portion of extra money. For example, up to 40% (or $1,000) of the maximum $2,500 for the American Opportunity Tax Credit can be put toward your tax refund if your tax liability hits $0.
Note: The best tax software will determine your eligibility for tax credits using a question-and-answer interview process and automatically add your info to your electronic return, but we've also provided links to IRS forms for each tax credit for those filing on paper or those wishing to learn more. Federal tax credits are recorded on Form 1040 Schedule 3 -- most also require a specific separate form, worksheet or schedule.
Most federal income tax credits are nonrefundable.
Also note that these tax credits listed below are those designed for average American taxpayers. There are additional tax credits for business or rental-property owners that are not covered here.
All the tax credits for parents and families
Some of the biggest benefits in the federal tax code are designed for parents of young kids. All parents who meet income limits receive the child tax credit, while families can also get money back for child care, adult dependents or costs related to adoptions.
Child tax credit: This credit for families with young children provides $2,000 for each dependent child with a Social Security number who was younger than 17 at the end of 2024. The $2,000 per child amount begins to phase out at incomes of $200,000 for single tax filers and $400,000 for married couples filing jointly.
Eric Bronnenkant, head of tax at Betterment, told CNET that the child tax credit is one of the most valuable for taxpayers. He notes that, "the credit is available per qualifying child, so parents of four children could receive $8,000." After several years during the pandemic where the credit was fully refundable, the child tax credit is nonrefundable again, but the additional child tax credit currently (see below) allows you to get up to $1,700 back for each if your credits outweigh your tax liability.
You can claim the child tax credit this year by listing your eligible dependents and their Social Security numbers on your Form 1040 and completing Schedule 8812, "Credits for Qualifying Children and Other Dependents."
Credit for other dependents: If you have children or other dependents who were 17 or older at the end of 2024, you can get a $500 credit for each of them. This information should also be included in Schedule 8812, on lines 6 to 8. The credit starts to phase out at $200,000 of income for single filers or $400,000 for married filing jointly.
Additional child tax credit: Although the IRS puts this "credit" on a separate page of Form 8812, it works like a partial refund for any child tax credit money that goes beyond your tax burden. If you are eligible for the $2,000-per-child tax credit but your tax liability is already $0, you can receive up to $1,700 for each eligible child as part of a tax refund.
The additional child tax credit can be calculated by completing the worksheet on page 2 of Schedule 8812.
Adoption credit: If you adopted a child or started the adoption process in 2024, you can get up to $16,810 back for eligible expenses, including travel costs and court fees. The credit starts to phase out for taxpayers with modified adjusted gross income (MAGI) of $252,150 and is completely eliminated at $292,150.
The adoption credit is claimed by filing Form 8839, "Qualified Adoption Expenses." You cannot claim the adoption credit when you adopt your spouse's child.
Child and dependent care credit: This tax credit provides money back for expenses related to care for qualifying dependents younger than 13 years old or dependents who are physically or mentally disabled.
Depending on your income, it provides 20 to 35% of your money back on $3,000 in expenses for one qualifying dependent or $6,000 for two or more. Once your adjusted gross income tops $43,000, your credit is limited to 20% of expenses.
The child and dependent care credit was expanded in 2021 to provide up to 50% back on expenses up to $8,000 for one child or $16,000 for multiple children, and it was also fully refundable, but those pandemic-related provisions that expanded the child care credit expired at the end of 2021, and the credit is now nonrefundable.
To claim the child and dependent care credit on your 2024 tax return, you'll add your dependents and their Social Security numbers to your 1040 form and complete IRS Form 2441, "Child and Dependent Care Expenses."
Earned Income Tax Credit: While the EITC isn't limited to families, taxpayers with children reap the biggest rewards. Designed for low- to moderate-income taxpayers, the EITC ranges from $600 to a maximum of $6,935.
For the tax year 2023, here are the tax credits and income limits for the EITC:
Earned Income Tax Credit payouts
| Number of children | EITC amount | Income limit for single, head of household or widowed filers | Income limit for married filing jointly |
|---|---|---|---|
| 0 | $632 | $18,591 | $25,511 |
| 1 | $4,213 | $49,084 | $56,004 |
| 2 | $6,960 | $55,768 | $62,688 |
| 3 | $7,830 | $59,899 | $66,819 |
Source: Earned Income and Earned Income Tax Credit (EITC) Tables on IRS.gov
Additionally, to claim the EITC, you cannot have more than $11,600 of investment income. Eligible EITC recipients with no children can claim the credit on their 1040 form. Taxpayers with children will need to file Schedule EITC in order to claim their full credit.
The EITC is a refundable tax credit -- meaning you will receive money for it even if you don't owe taxes -- a valuable benefit for people who pay no or little taxes. If you claim the EITC, you need to wait a little longer for your tax refund -- by law, the IRS cannot issue refunds with the EITC until mid-February. The IRS says that if you claim the EITC, you should expect to see your refund by March 3, 2025.
Tax credits for higher education
The US tax code currently includes two tax credits for higher-education costs. The Lifetime Learning Credit and American Opportunity Tax Credit are very similar, but it's important to know the differences.
The AOTC is more generous than the LLC, but it has a few more restrictions. The LLC has less of a monetary benefit but is more flexible for nontraditional college students, such as those who delayed starting college after high school or those who attend part time.
Lifetime learning credit: Introduced with the Taxpayer Relief Act of 1997, the LLC offers 20% back of the first $10,000 spent on higher education expenses at eligible institutions. The student can either be yourself, your spouse or a qualified dependent, as long as you paid the bills.
The maximum benefit per return is $2,000, regardless of how many students you support. The credit begins to phase out at $80,000 of modified adjusted gross income for single filers ($160,000 for married filing jointly) and is eliminated at $90,000 of MAGI ($180,000 for married filing jointly).
American opportunity tax credit: Designed to replace the Hope Scholarship credit -- which helped pay for the first two years of college -- the AOTC increased both the benefit amount and number of years that families could claim the incentive.
The AOTC provides 100% back on the first $2,000 in higher education expenses for you, your spouse or a qualified dependent, then gives 25% back on the next $2,000 for a total maximum benefit of $2,500. Along with tuition and fees, expenses for books, supplies and equipment are also eligible, but not room and board or transportation.
The AOTC is partially refundable -- you'll get 40% of the money from any extra credit beyond your taxes owed. Bronnenkant told CNET that's "an attractive feature" that gives parents "the choice to not claim the child as a dependent, so that a child with no income can claim the refundable portion."
Both the LLC and AOTC are reported on IRS Form 8863. You are allowed to claim both credits on your tax return, but you can't take both credits for the same student and same year. You also cannot claim either tax credit if you are married filing separately.
Differences between educational expense tax credits
| Rules | Lifetime Learning Credit | American Opportunity Tax Credit |
|---|---|---|
| Refundable status | Nonrefundable | Partially refundable (40%) |
| Academic progress | No requirements for degrees or credentials | Student must be pursuing degree or credential |
| Maximum benefit | Up to $2,000 per return | Up to $2,500 per student |
| Eligibility requirement | Includes undergraduate, post graduate and continuing studies | Only first 4 years of higher education |
| Limit on years claimed | Unlimited | 4 years per eligible student |
| Qualified expenses | Tuition and fees | Tuition, fees and required course materials |
| Excluded behavior | No exclusions | Student cannot have felony drug conviction |
Source: Compare Education Credits on EITC.IRS.Gov
Health care tax credits for health insurance
Premium tax credit: The premium tax credit is related to the Affordable Care Act and designed to help individuals and families pay the costs of health coverage purchased through the public Health Insurance Marketplace.
The premium tax credit is restricted to taxpayers who earn between 100% and 400% of the federal poverty guidelines. For 2021 and 2022, the upper limit restriction was eliminated, but it returned starting in 2023.
When you buy insurance through the public marketplace, you'll need to provide your income information, which will then be used to estimate your premium tax credit. If you like, you can receive advance payments of the premium tax credit during the year in order to pay your premiums.
If you received advance premium tax credit payments in 2024 or if you want to claim the full credit on your 2024 tax return, you'll need to complete Form 8962, "Premium Tax Credit." If the advance payments you received are greater than your eligible amount, you'll need to repay the difference.
A question-and-answer app on the IRS website can help you determine whether you qualify for the premium tax credit. The premium tax credit is fully refundable.
Retirement and investing tax credits
If you invested money abroad or contributed to retirement accounts in 2024, you'll want to look at the saver's credit and the foreign tax credit.
Saver's tax credit: Officially named the retirement savings contributions credit, the saver's credit gives you money back on qualifying contributions to retirement accounts. Depending on your adjusted gross income (AGI), you can get 10%, 20% or 50% of your money back on:
- Contributions to traditional or Roth IRAs
- Salary deferrals for 401(k), 403(b), 457(b), SARSEP or SIMPLE plans
- After-tax employee contributions to qualified retirement plans
- Contributions to ABLE accounts for disabled people
- Contributions to a 501(c)(18)(D) plan (an old, member-funded pension trust)
Here are the income restrictions and saver's tax credit percentage amounts for 2024:
How much you can claim for the saver's credit
| Saver's credit rate | Married filing jointly AGI limit | Head of household AGI limit | AGI limit for all other filing statuses |
|---|---|---|---|
| 50% | $46,000 or less | $34,500 or less | $23,000 or less |
| 20% | $46,001to $50,000 | $34,501 to $37,500 | $23,001 to $25,000 |
| 10% | $50,001 - $76,500 | $37,501 - $57,375 | $25,001 - $38,250 |
| 0% | More than $76,500 | More than $57,375 | More than $38,250 |
Source: Retirement Savings Contributions Credit (Saver's Credit) on IRS.gov
To claim the saver's credit, you'll need to file Form 8880, "Credit for Qualified Retirement Savings Contributions."
Foreign tax credit: If you were taxed on your income by a foreign country in 2024 and that income is also taxable by the US, you could be eligible for a credit to reduce your tax bill. The foreign tax credit can apply to wages but also to stocks, bonds or mutual funds bought in foreign countries.
What's interesting about foreign taxes on income is that they can be claimed as either a tax credit or a tax deduction, though the IRS advises most taxpayers will benefit more from taking the credit. The foreign tax credit is calculated as a fraction of your total US tax liability, depending on total foreign and domestic income.
To claim the foreign tax credit, you'll need to file Form 1116, "Foreign Tax Credit (Individual, Estate, or Trust)."
Home and car owner tax credits
Our final group of tax credits includes money back on your taxes for making energy efficient improvements to your home, first-time homebuyer credits and incentives for purchasing electric cars.
If you installed solar panels in 2022, you could get 30% of the cost back.
Residential clean energy credit: This home tax credit is the big one -- it provides 30% back on costs related to "solar electricity, solar water heating, wind energy, geothermal heat pumps, biomass fuel systems or fuel cell property." Fuel cell property is capped at $500 per half a kilowatt of capacity, but there are no other restrictions.
The IRA keeps the credit rate at 30% through 2032. After that, the credit will drop to 26% in 2033 and 22% in 2034 and then expire in 2035.
Energy efficient home improvement credit: Formerly called the nonbusiness energy property credit, this smaller home tax credit gives you money for the installation of Energy Star-certified products and qualified improvements like new windows or insulation.
Before 2023, the tax credit offered $50 to $300 for installing eligible appliances like water heaters and furnaces, and 10% back for other energy efficiency improvements, with a $500 lifetime limit.
For energy efficient improvements made in 2024, you can now claim up to $3,200 annually. Instead of flat fees for specific improvements, the energy efficient home improvement credit will now give you 30% back on qualified energy expenses.
The $3,200 annual limit for the energy efficient home improvement credit is broken down as follows:
- $1,200 limit for qualified energy efficient improvements, with limits on doors ($250 per door; $500 total), windows ($600) and home energy audits ($150)
- $2,000 limit for qualified heat pumps, biomass stoves or biomass boilers
There's no lifetime limit on the credit anymore, but it's nonrefundable and you can't apply any excess credit to future tax years. To claim the energy efficient home improvement credit, the qualified expenses must be related to your primary residence (where you live most of the year).
You can learn more about qualified expenses for the energy efficient home improvement credit on the IRS website. You can claim both of the home energy credits on Form 5695, "Residential Energy Credits."
Mortgage interest credit: This credit for first-time homebuyers should be considered when you are purchasing a home, because you'll need to get a mortgage credit certificate (MCC) from your lender in order to qualify.
If your income qualifies you for an MCC, you can get a credit for a percentage of your mortgage interest up to $2,000. The percentage of interest that you can claim varies from state to state, ranging from 10 to 50 percent.
After claiming that set percentage of your mortgage interest as a credit, you'll then be able to take the remaining mortgage interest as a tax deduction, if you itemize.
The mortgage interest credit is nonrefundable, but, if your credits outweigh your taxes owed, you can "carry forward" extra credit money for up to three years.
Electric vehicle credits: There are two electric vehicle credits: One for installing a charging station on your personal property and another for purchasing an electric vehicle.
If you installed a Tesla Powerwall in 2023, you can likely claim the alternative fuel station tax credit.
If you installed any sort of charging station that uses alternative energy at your home in 2024, you can claim a tax credit worth 30% of the installation cost or $1,000, whichever is smaller. You'll need to file Form 8911, "Alternative Fuel Vehicle Refueling Property Credit."
Clean vehicle tax credit: If you purchased a new electric car or light truck in 2024, you might be eligible for up to $7,500, but there are several restrictions.
To qualify for the new EV credit, vehicles must have four wheels, weigh less than 14,000 pounds and run on an electric motor with a battery that lasts at least 7 kilowatt hours and can be charged externally.
The final assembly of your vehicle must have been completed in the US, and the manufacturer's suggested retail price (MSRP) can't be more than $55,000. There are also income limitations for the credit, depending on your filing status:
Income limits for EV tax credit
| Filing status | Income |
|---|---|
| Single | $150,000 |
| Head of household | $225,000 |
| Married, filing jointly | $300,000 |
| Married, filing separately | $150,000 |
Source: Credits for new clean vehicles purchased in 2023 or after on IRS.gov
Also introduced in 2023 was a tax credit for purchasing used EVs. The previously owned clean vehicle credit can give you up to 30% of your purchase price back or $4,000, whichever is lesser. Among other requirements, the price of the used EV can't exceed $25,000, and the model year of the car must be at least two years earlier than the year it was purchased. For your 2024 taxes, vehicles released in 2022 or earlier are eligible.
The income limits for the previously owned clean vehicle credit are a little different than the credit for purchasing a new EV. Single tax filers cannot earn more than $75,000, heads of household cannot earn more than $112,500, and married taxpayers filing jointly cannot earn more than $150,000.
To claim either electric vehicle tax credit, file Form 8936, "Qualified Plug-In Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles)." The new clean vehicle credit can be claimed by completing Parts I, II, and III. The previously owned clean vehicle credit can be claimed by completing Parts I and IV.
Remember that you don't need to itemize deductions in order to claim tax credits, and that the best tax software will make it easy for you to identify all the credits that you can claim. Forget the forms, file electronically and use direct deposit to get the biggest refund possible in the quickest time.