Unclaimed Tax Credits That Could Put Cash in Your Pocket

Tax credits are among the most powerful ways to reduce what you owe the government—or increase your refund—because they provide a dollar-for-dollar reduction in your tax liability. Unlike deductions, which only reduce your taxable income, credits directly reduce the amount of tax you owe, making them especially valuable. Yet every year, billions of dollars in tax credits go unclaimed because taxpayers either don't know they qualify or don't understand how to claim them.

The Earned Income Tax Credit (EITC): The Most Overlooked Tax Benefit

The Earned Income Tax Credit is designed to provide financial assistance to low to moderate-income working individuals and families. Despite being one of the most beneficial tax credits available, the IRS estimates that about 20% of eligible taxpayers fail to claim it each year.

What makes the EITC particularly valuable is that it's refundable, meaning if the credit exceeds your tax liability, you'll receive the difference as a refund. For many families, this can result in thousands of dollars that can help cover essential expenses or build savings.

Child Tax Credit: More Generous Than You Might Think

The Child Tax Credit underwent significant changes in recent years. While some temporary pandemic-era expansions have expired, this credit remains a substantial benefit for families with dependent children under age 17.

Key Child Tax Credit Details:

• Worth up to $2,000 per qualifying child
• Up to $1,600 per child is refundable through the Additional Child Tax Credit
• Available to single filers with incomes up to $200,000 and joint filers with incomes up to $400,000
• Can be claimed retroactively for up to three years
• Children must have a valid Social Security Number to qualify

Child and Dependent Care Credit: Relief for Caregiving Costs

If you paid for care for a child under 13 or a dependent adult while you worked or looked for work, you might qualify for the Child and Dependent Care Credit. This credit helps offset the cost of daycare, after-school programs, summer camps, adult day programs, or in-home caregivers.

What You Need to Know:

• Credit worth 20-35% of qualifying expenses, depending on your income
• Maximum credit of $1,050 for one qualifying person or $2,100 for two or more qualifying persons
• Both spouses must have earned income to claim the credit (unless one spouse is a full-time student or disabled)
• Care provider information (including tax ID) must be reported on your return

Education Credits: Reducing the Cost of Higher Education

Two valuable education credits can help offset the cost of higher education for yourself or your dependents. Many taxpayers qualify for these but don't realize it or confuse which one to claim.

Saver's Credit: Get Paid to Save for Retirement

The Retirement Savings Contributions Credit, commonly known as the Saver's Credit, is one of the most overlooked tax benefits. It rewards low to moderate-income taxpayers for contributing to retirement accounts.

Saver's Credit Details:

• Credit worth 10%, 20%, or 50% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly)
• Maximum credit: $1,000 ($2,000 if married filing jointly)
• Income limits for 2024: $36,500 (single), $54,750 (head of household), or $73,000 (married filing jointly)
• Available for contributions to 401(k)s, 403(b)s, 457 plans, Traditional and Roth IRAs, and other qualified retirement plans
• Non-refundable but can significantly reduce your tax bill

This credit effectively gives you an immediate return on your retirement savings, on top of any tax benefits and employer matches your retirement account might already provide.

Premium Tax Credit: Healthcare Savings

If you purchase health insurance through the Health Insurance Marketplace (healthcare.gov), you might qualify for the Premium Tax Credit to help cover your premium costs. Recent legislation has expanded eligibility and increased the amount of this credit.

How to Claim Credits You Missed

If you've missed out on tax credits in prior years, it's not too late to claim them. The IRS generally allows you to file amended returns for up to three years after the original filing deadline.

Steps to Claim Past Tax Credits:

1. Determine which tax years and credits you may have missed
2. Gather necessary documentation (income records, receipts, etc.)
3. File Form 1040-X, Amended U.S. Individual Income Tax Return, for each year
4. Include any required forms or schedules specific to the credits you're claiming
5. Submit your amended returns by mail (electronic filing is not available for amended returns)
6. Allow 16 weeks or more for processing