If you are going to make your tax refund higher in 2025, then you must learn about the key tax credits that are provided by the IRS (Internal Revenue Service). There are some tax credits that are so powerful that they can lower your tax amount and give you more refund. Let’s learn about 5 such powerful tax credits that can enhance your financial status.
1. Earned Income Tax Credit (EITC) – A wonderful chance for low-income earners
The most precious tax credit provided by the IRS is the Earned Income Tax Credit (EITC). If you earn a low to moderate income, you can be eligible for this credit.
If you do not have children, the most you can receive from the EITC is $632. But with a qualifying child, your refund on taxes can boost up to $4,213.
If you have two children, it can be a maximum of $6,960**, and *three or more children families* can receive up to $7,830**. This child tax credit will decrease your total tax payment and improve your economy.
2. Child Tax Credit (CTC) – Special for families with children
If you have a qualified child, the Child Tax Credit (CTC) can be helpful to you. In 2025, qualified taxpayers can receive up to a maximum of $2,000 under this tax credit.
If you are also eligible for Additional Child Tax Credit (ACTC) over and above CTC, you are entitled to receive extra tax relief. It is a refundable tax credit, so if the tax credit is more than your total tax paid, then the difference is refunded to you.
In 2025, the top amount of the ACTC is $1,700 per child**. If you have two or more qualifying children, your refund might be even greater.
3. American Opportunity Tax Credit (AOTC) – Exclusive to College Students
For students attending college, the American Opportunity Tax Credit (AOTC) is an excellent choice. Under this credit, eligible filers can receive a maximum of $2,500 per student.
Of this, as much as $1,000 can be directly refunded even if you owe no tax. If you or a dependent of yours is going to college, it would be prudent to utilize this credit.
4. Savers Credit – Benefit on Retirement Savings
Individuals who are saving for retirement can qualify for the Savers Credit. This tax credit is given to individuals who are saving to their Retirement Savings Account (401(k), IRA, etc.).
The most that this credit can be for an individual is $2,000. If you are married and filing jointly, you can double this amount.
If you are saving for your retirement, this credit will make saving for your future more worthwhile and decrease your tax burden.
5. Premium Tax Credit – Assistance with Health Insurance
The Premium Tax Credit is a refundable tax credit that assists qualified taxpayers in paying their Health Insurance Premium.
It is for those who bought health insurance through the Health Insurance Marketplace. If you are eligible for this credit, your insurance premium can be reduced and your finances can get better.
Conclusion
To get the most out of your tax refund in 2025, utilize these 5 most important tax credits:
- EITC – for low-income earners
- CTC & ACTC – for families with children
- AOTC – for students pursuing higher education
- Saver’s Credit – for retirement savers
- Premium Tax Credit – for health insurance
Each of the tax credits will have varying rules on eligibility, so ensure that you know what all the requirements are and be prepared with the correct documents. With proper knowledge and planning, you can enhance your tax refund in 2025 and bolster your financial stability.
FAQs
Q1. Who qualifies for the Earned Income Tax Credit (EITC)?
Low-to-moderate-income taxpayers may qualify. The credit amount depends on income and the number of children.
Q2. How much is the Child Tax Credit (CTC) in 2025?
Eligible taxpayers can receive up to $2,000 per child, with a refundable portion (Additional Child Tax Credit) of up to $1,700.
Q3. What is the maximum amount for the American Opportunity Tax Credit (AOTC)?
AOTC offers up to $2,500 per student, and up to $1,000 may be refunded even if no tax is owed.
Q4. Can I claim the Saver’s Credit if I have a 401(k) or IRA?
Yes, eligible taxpayers who contribute to a retirement savings account can receive up to $2,000 in credit.
Q5. Who can benefit from the Premium Tax Credit?
Taxpayers who purchase health insurance through the Health Insurance Marketplace may qualify for financial assistance through this credit.