Credits are worth more than deductions
A deduction reduces the income you are taxed on. A credit reduces the tax you owe dollar for dollar. Some credits are even refundable, meaning you can receive money back beyond the tax you owed. This is why people who do not usually file can still benefit from filing.
Credits to know about
| Credit | Who it is for |
|---|---|
| Earned Income Tax Credit (EITC) | Workers with low to moderate earnings, including some without children |
| Credits for children and other dependents | Filers who support children or other qualifying dependents |
| Education credits | People paying qualified higher-education costs |
| Retirement Savings Contributions Credit (Saver's Credit) | Lower-income savers contributing to retirement accounts |
Income limits, amounts and rules change, so use the official IRS pages for the current tax year instead of relying on a number printed anywhere else.
Why credits go unclaimed
- People assume they earn too little to file.
- They are unaware a credit exists or that they qualify.
- Tax software questions are skipped or misunderstood.
- Life changes such as a new child or a new job are not considered.
How to check
- Use the IRS EITC eligibility tool and the other interactive tools on IRS.gov.
- Use free filing help: IRS Free File for eligible filers, or VITA volunteer sites that specialize in credits.
- If you missed credits in a past year, you may be able to amend or file late. See the three-year rule.
Next step
Estimate your take-home pay with the Salary Calculator and review tax season basics.
Common questions
What is the difference between a tax credit and a deduction?
A deduction lowers taxable income. A credit lowers your tax bill directly, so it is usually worth more dollar for dollar.
Can I get the EITC without children?
Some workers without qualifying children can qualify, subject to income and age rules. Check the IRS tool for the current year.
Do I need to file if I have very low income?
You may not be required to, but filing may be the only way to claim refundable credits or a refund of withheld tax.
Where can I get free help claiming credits?
IRS Free File and VITA volunteer sites for people who qualify.