Published: December 9, 2024

Boost Your Savings by Unlocking Little-Known Tax Credit Opportunities

For many, the tax code feels like a complicated maze, but hidden within it are opportunities to keep more of your hard-earned money. By uncovering lesser-known tax credits, you can take meaningful steps toward boosting your savings. In this article, I’ll break down these often-overlooked benefits to help you make smarter, more confident financial decisions.
Two people handling cash and budgeting with a calculator and notebook at a table.

Exploring the Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is one of the most impactful yet underutilized tax credits available to individuals and families. Designed to benefit low-to-moderate income workers, the EITC can significantly reduce the amount of taxes owed—and in many cases, result in a refund. Despite its potential to save taxpayers thousands of dollars, the IRS estimates that about 20% of eligible taxpayers fail to claim it each year.

Eligibility for the EITC depends on several factors, including:

  • Income
  • Filing status
  • Number of qualifying dependents

For instance, in 2023, families with three or more children could qualify for a maximum credit of $7,430, depending on their income level. Even individuals without children may qualify for a smaller credit, provided their earned income falls within the required limits. It’s worth noting that investment income must not exceed a certain threshold to remain eligible, and this amount changes annually based on inflation adjustments.

To ensure you’re claiming the EITC correctly, carefully review your eligibility or consult with a qualified tax professional. Using free tax filing tools can also help you determine whether you qualify. Missing out on this credit could mean leaving valuable savings on the table, so it pays—literally—to double-check your tax return each year1.

Maximizing Education Tax Credits

For students and families, education-related tax credits offer an excellent way to offset the costs of higher education. Two prominent credits in this category are:

  1. The American Opportunity Tax Credit (AOTC)
  2. The Lifetime Learning Credit (LLC)

The AOTC provides up to $2,500 per eligible student for qualified education expenses, including tuition, books, and supplies. A significant advantage of this credit is its partial refundability—if the credit brings your tax liability to zero, up to 40% of the remaining credit (or $1,000) can be refunded to you. This makes it particularly valuable for students who work part-time or whose overall tax liability is low.

The LLC, on the other hand, is not refundable but offers more flexibility in terms of eligible expenses and the number of years it can be claimed. It provides a credit of up to $2,000 annually for tuition and fees associated with undergraduate, graduate, or professional degree programs. Unlike the AOTC, there’s no limit on the number of years you can claim the LLC, making it an excellent option for lifelong learners or those pursuing advanced degrees.

Both credits have income phase-out thresholds, so higher-income individuals may not qualify. To determine which credit is most advantageous for your situation, consult the IRS guidelines or work with your school’s financial aid office. Consider reading this guide on maximizing tuition savings for additional insights.

Taking Advantage of the Saver’s Credit

Saving for retirement is crucial, but did you know there’s a tax credit designed to reward you for it? The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is a lesser-known benefit aimed at incentivizing low- and moderate-income taxpayers to contribute to retirement accounts such as IRAs or 401(k)s.

Here’s how it works:

  • Eligible individuals can claim a credit of up to 50% of their retirement contributions.
  • The maximum credit is $1,000 for single filers and $2,000 for joint filers.
  • The exact percentage of the credit depends on your adjusted gross income (AGI) and filing status.

To qualify for the Saver’s Credit, you must meet the following criteria:

  • Be at least 18 years old.
  • Not be a full-time student.
  • Not be claimed as a dependent on another person’s tax return.

By taking advantage of the Saver’s Credit, you not only lower your tax liability but also boost your long-term financial security. Explore additional strategies for building financial security to complement your retirement savings.

Making the Most of Energy Efficiency Credits

Going green isn’t just good for the environment—it can also save you money come tax season. The federal government offers several tax credits to encourage homeowners to invest in energy-efficient upgrades. These credits can help offset the costs of installing solar panels, upgrading HVAC systems, or making other energy-saving improvements to your home.

Examples include:

  • The Residential Clean Energy Credit, which allows you to claim 30% of the cost of installing renewable energy systems such as solar, wind, or geothermal. This credit is available through 2032.
  • The Energy Efficient Home Improvement Credit, which covers 30% of the cost of qualifying energy-efficient upgrades, such as insulation, windows, and doors, up to an annual limit of $1,200.

To maximize your savings, keep detailed records of all qualifying expenses and ensure the products you purchase meet the IRS’s eligibility criteria. You can also explore affordable home improvement ideas to further reduce utility costs.

FAQs: Common Questions About Tax Credits

  • What is the Earned Income Tax Credit?
    The EITC is a refundable tax credit designed for low-to-moderate income workers that can reduce taxes owed or result in a refund.
  • How do I qualify for education tax credits?
    Eligibility for the AOTC and LLC depends on your income, educational expenses, and filing status. Review IRS guidelines for specifics.
  • Can I claim multiple credits?
    Yes, but some credits have restrictions. For example, you can’t claim both the AOTC and LLC for the same student in the same year.
  • What records should I keep?
    Always retain receipts, invoices, and documentation for qualifying expenses to substantiate your claims.
  • Are there tools to help me?
    Yes, consider using budgeting apps or tax preparation software to streamline the process.

Final Thoughts: Claim What’s Rightfully Yours

Navigating the tax code may seem daunting, but the rewards of uncovering hidden tax credits are well worth the effort. From the Earned Income Tax Credit to education-related benefits, the Saver’s Credit, and energy efficiency incentives, these opportunities are designed to help taxpayers like you keep more of your hard-earned money.

To maximize these benefits:

  • Stay informed about eligibility requirements and income thresholds.
  • Consider seeking professional advice.
  • Use reputable tax preparation software to ensure accuracy.

Every dollar saved through tax credits is a dollar that can be reinvested in your financial goals, whether that’s paying off debt, building an emergency fund, or planning for retirement. Remember, the tax code is not just a burden—it’s also a tool. With a little effort and the right information, you can unlock its potential to secure a brighter financial future.

1Understand the Earned Income Tax Credit published on January 23, 2023, from IRS.gov

2Education Tax Credits: AOTC vs. LLC published on February 15, 2023, from Ed.gov

3Retirement Savings Contributions Credit published on March 10, 2023, from Investopedia

Luis Gomez
By Luis Gomez

Luis Gomez is passionate about advocating for consumer rights. He writes with a strong commitment to providing transparency in the finance industry. His articles aim to equip readers with the knowledge to navigate their finances confidently.