What Are the Common Tax Credits I Might Qualify For?

How Tax Credits Reduce Your Tax Bill and How to Know If You’re Eligible**

Tax season can feel overwhelming, but tax credits are one of the most valuable tools available to help lower your overall bill. Unlike deductions—which reduce your taxable income—tax credits reduce your tax liability dollar for dollar. In some cases, certain tax credits can even give you a refund beyond what you paid in taxes.

This article breaks down the most common tax credits individuals and families may qualify for, how these credits work, and how to determine whether you may be eligible.

1. How Do Tax Credits Work?

Before diving into the specific credits, it’s helpful to understand the two main categories:

Nonrefundable Tax Credits

A nonrefundable credit can reduce your tax bill to zero, but it cannot generate a refund. If you owe $800 in taxes and qualify for a $1,200 nonrefundable credit, you can only use $800 of it—your bill drops to zero but you do not receive the remaining $400.

Refundable Tax Credits

A refundable credit can reduce your tax bill below zero, meaning you receive the remainder as a refund. If you owe $800 and the credit is worth $1,200, you’ll get a $400 refund.

Many credits also have partially refundable provisions.

Understanding this distinction helps you estimate your refund more accurately.

2. The Most Common Tax Credits You May Qualify For

Below are the most widely used credits for individuals and families. Eligibility varies based on income, age, dependents, and other factors.

A. The Child Tax Credit (CTC)

What it is:

A credit designed to help families with the cost of raising children.

How much:

Historically up to $2,000 per qualifying child, with up to $1,600 refundable depending on tax year and income phaseouts. (Amounts can vary year to year if Congress makes changes.)

Eligibility basics:

You generally qualify if:

• You have a dependent child under age 17.

• The child lives with you more than half the year.

• You provide over half of their financial support.

• The child has a valid Social Security number.

• Your income falls below IRS phaseout limits (these are high enough that many families qualify).

Why it matters:

This is one of the most valuable credits available to families, and the partially refundable aspect means many households receive a larger refund.

B. Earned Income Tax Credit (EITC)

What it is:

A refundable credit for low- to moderate-income workers.

How much:

The credit can range from a few hundred dollars to over several thousand dollars depending on:

• Your income

• Filing status

• Number of qualifying children

Taxpayers without children can still qualify, though the credit is smaller.

Eligibility basics:

To qualify, you must:

• Have earned income (wages, salary, self-employment income).

• Have income below IRS limits, which change annually.

• Be a U.S. citizen or resident for most of the year.

• Meet age requirements (special rules apply to childless workers).

• Not be claimed as someone else’s dependent.

Why it matters:

Because EITC is fully refundable, it can significantly increase refunds—even for taxpayers who owe no tax.

C. Child and Dependent Care Credit

What it is:

A credit for a portion of out-of-pocket expenses you pay for childcare or care for a disabled adult dependent so that you can work or look for work.

How much:

Typically up to 35% of childcare costs, subject to annual caps that vary by tax year.

Eligibility basics:

You may qualify if:

• You paid for daycare, after-school programs, or adult care.

• You needed the care so you could work or seek employment.

• The dependent is a child under age 13 or a spouse or adult dependent incapable of self-care.

Why it matters:

This credit is especially useful for working parents and caretakers.

D. American Opportunity Tax Credit (AOTC)

What it is:

A credit for education expenses during the first four years of college.

How much:

Up to $2,500 per eligible student, with up to 40% refundable.

Eligibility basics:

You can claim this credit if:

• The student is enrolled at least half-time in an eligible undergraduate program.

• The expenses are for tuition, books, and required materials.

• The student has not exceeded four years of post-secondary education.

• Your income falls below phaseout limits.

Why it matters:

Students and parents can significantly reduce college expenses.

E. Lifetime Learning Credit (LLC)

What it is:

A credit for ongoing education at any level—college, graduate school, or continuing education.

How much:

Up to $2,000 per tax return (nonrefundable).

Eligibility basics:

You may qualify if:

• You paid tuition for undergraduate, graduate, or professional courses.

• You’re improving job skills or pursuing a degree.

• Your income falls below the limits.

Why it matters:

Unlike the AOTC, there is no limit on the number of years you can claim the LLC.

F. Saver’s Credit (Retirement Savings Contribution Credit)

What it is:

A credit designed to reward low- and moderate-income taxpayers for contributing to retirement accounts.

How much:

Between 10% and 50% of your contributions, depending on your income.

Eligibility basics:

You may qualify if:

• You contribute to an IRA, 401(k), or other qualified retirement plan.

• You are 18 or older.

• You are not claimed as a dependent.

• Your income falls under IRS limits.

Why it matters:

This credit essentially gives you money back for saving for retirement.

G. Premium Tax Credit (PTC)

What it is:

A credit that helps lower the cost of health insurance purchased through the Health Insurance Marketplace (Affordable Care Act).

How much:

Varies based on income, family size, and the cost of Marketplace plans in your area.

Many taxpayers receive advance payments throughout the year to lower monthly premiums.

Eligibility basics:

You may qualify if:

• You buy insurance through the Marketplace.

• Your household income is within certain thresholds (which have been expanded in recent years).

• You do not have access to affordable employer-sponsored coverage.

Why it matters:

This credit directly reduces your monthly health insurance premiums.

H. Residential Energy Credits

What they are:

Credits for making energy-efficient improvements to your home.

Common examples:

• Solar panel installation

• Energy-efficient windows, doors, or insulation

• Heat pumps and energy-saving appliances

How much:

Varies widely—some energy credits have caps, while certain clean energy credits can cover up to 30% of qualified expenses.

Eligibility basics:

Generally, you must:

• Make qualifying improvements to your primary residence (sometimes to second homes).

• Follow IRS rules regarding eligible equipment and installation.

Why it matters:

These credits can reduce your tax bill while helping lower your energy costs long-term.

I. Adoption Tax Credit

What it is:

A nonrefundable credit for adoption expenses.

How much:

Up to a substantial amount per adopted child (figure adjusted annually).

Eligibility basics:

You may qualify if you incurred expenses related to:

• Adoption fees

• Legal fees

• Court costs

• Travel expenses for the adoption

J. Electric Vehicle (EV) Tax Credit

What it is:

A clean vehicle credit for purchasing qualifying electric or plug-in hybrid vehicles.

How much:

Up to $7,500 for new eligible vehicles; a lower amount is available for certain used EVs.

Eligibility basics:

• Vehicle must meet battery, assembly, and price requirements (which change periodically).

• You must meet income limits.

• Vehicle must be primarily used in the U.S.

3. How Do I Know Which Credits Reduce My Tax Bill?

Here’s a quick overview of how each one affects your taxes:

Credits That Can Reduce Tax to Zero and Give You Refunds (Refundable Credits)

• Earned Income Tax Credit (EITC)

• American Opportunity Tax Credit (partial refund)

• Child Tax Credit (partial refund)

• Premium Tax Credit

• Some clean energy credits (depending on year)

Credits That Only Reduce Your Tax to Zero (Nonrefundable Credits)

• Child and Dependent Care Credit

• Lifetime Learning Credit

• Saver’s Credit

• Adoption Credit

• Most education and energy credits (depending on year)

Refundable credits often provide the biggest boost to refunds for eligible families.

4. How Do I Know If I’m Eligible?

Eligibility depends on several key factors:

1. Income Level

Most credits phase out at higher income levels. If your income is moderate or low, you may qualify for:

• EITC

• Saver’s Credit

• Premium Tax Credit

Higher-income individuals may still qualify for:

• Energy credits

• EV credits (if income under limit)

• Adoption credit

• Lifetime Learning Credit (depending on limits)

2. Whether You Have Dependents

Having children or other dependents opens the door to large credits like:

• Child Tax Credit

• Child and Dependent Care Credit

• EITC (larger amount)

3. Education Expenses

You may qualify if you or a dependent:

• Is in college

• Is taking continuing education courses

• Is pursuing job-related training

4. Health Insurance Purchases

If you buy coverage through the Marketplace, you may qualify for the Premium Tax Credit.

5. Home Improvements

Energy efficient renovations or clean energy installations can create eligibility.

6. Filing Status

Certain credits require specific filing statuses (e.g., Married Filing Jointly).

7. U.S. Residency and Identification Requirements

Some credits (EITC, CTC) require:

• A valid Social Security number

• Residency in the U.S. for part or all of the year

5. Where Do I Claim These Credits?

Most credits are claimed directly on Form 1040 and supported with IRS schedules, such as:

• Schedule 8812 (Child Tax Credit)

• Schedule EIC (Earned Income Credit)

• Form 8863 (Education Credits)

• Form 2441 (Child and Dependent Care Credit)

• Form 8962 (Premium Tax Credit)

• Form 5695 (Energy Credits)

• Form 8936 (Clean Vehicle Credit)

Tax software typically walks you through these credits automatically.

6. Final Thoughts

Tax credits are one of the most powerful ways to reduce your tax bill—and in many cases, they can increase your refund substantially. Whether you’re a parent, student, worker, homeowner, or someone investing in clean energy or retirement savings, there is likely at least one credit you may qualify for.

If you’re unsure which credits apply to your situation, consider:

• Reviewing IRS guidelines for each credit

• Using reputable tax software

• Working with a tax professional

Maximizing the credits you qualify for can make a meaningful difference in your financial situation each year.