Tax credits allow you to directly reduce the amount of taxes owed, as long as certain conditions are met during the fiscal year. The Internal Revenue Service (IRS) has updated the amounts and eligibility criteria for a number of federal benefits for individuals and families in 2025. This report describes the options available and the factors that may limit access to these incentives.
The Earned Income Tax Credit (EITC) is intended for low- and moderate-income workers. The maximum amounts vary according to the number of children: for families with three or more children, the benefit totals $8,046, adjusted for inflation. “This credit is critical to reducing poverty in households with low-wage jobs,” official documents state.
More tax credits you could request in 2025
The Child Tax Credit (CTC) provides $2,000 per year for each child under the age of 17, with $1,700 refundable. The income limits for receiving the benefit are $200,000 for single taxpayers and $400,000 for couples filing jointly.
There are also additional tax breaks available, such as the Child and Dependent Care Credit, which covers up to $3,000 in expenses for one child and up to $6,000 for two or more.
The American Opportunity Tax Credit (AOTC) provides up to $2,500 per year for part-time college students. The Saver’s Credit, for its part, encourages retirement plan contributions by offering a benefit of up to $1,000 for individuals and $2,000 for couples.
Furthermore, the Premium Tax Credit reduces the cost of health insurance purchased through the Marketplace for those with incomes ranging from 100% to 400% of the federal poverty line.
Factors that impede access to tax credits
Changes in income, family composition, or employment status may prevent taxpayers from receiving certain benefits. For example, those with annual incomes greater than $66,819 (married couples) are no longer eligible for the Earned Income Tax Credit.
Similarly, the CTC is reduced by $50 for every $1,000 that exceeds $200,000 in the case of singles. “Inflation and wage increases can exclude those who previously qualified,” warns one expert.
Losing custody of a child, getting divorced, or being widowed all affect the CTC and EITC calculations. The first requires that the minor reside with the taxpayer for at least six months and possess a valid Social Security number. In the workplace, quitting work cancels the EITC, whereas if a spouse leaves, the Child Care Credit is lost.
The AOTC is only valid for four years per student, and its assembly is contingent on enrolment in degree programs. Errors in reporting a dependent’s Social Security number, as well as failure to file Form 8880 for the Saver’s Credit, can both prevent benefits from being received.
Specialists recommend reviewing the requirements for each credit on an annual basis, especially after changes like births, adoptions, or inheritances.
Using IRS tools or consulting with a certified tax advisor can help you avoid lost profits. A critical fact: the EITC does not apply if investment income exceeds $11,600, which many people overlook.
