Tax Credits Cheat Sheet

Overview

Tax credits reduce the amount of taxes owed, sometimes resulting in refunds. They differ from deductions, which lower taxable income. Understanding available credits helps maximize savings.

Key Tax Credits for 2025

*1. Child Tax Credit*

• Provides up to $2,500 per child through 2028, then $2,000 after that.
• Refundable portion: $1,700.
• Requires Social Security numbers for eligibility.

*2. Earned Income Tax Credit (EITC)*

• Designed for low-to-moderate-income workers.
• Credit ranges from $632 to $7,830, depending on income and dependents.

*3. Adoption Tax Credit*

• Covers qualified adoption expenses.
• Maximum credit: $17,280 for 2025.
• Nonrefundable but can be carried forward for up to five years.

*4. Energy-Efficient Home Improvement Credit*

• Covers home energy audits, heat pumps, air conditioners, and water heaters.
• Set to expire at the end of 2025 under proposed legislation.

*5. Clean Vehicle Tax Credit*

• Up to $7,500 for new EVs, $4,000 for used EVs.
• May be eliminated under new budget proposals.

*6. Education Tax Credits*

• American Opportunity Tax Credit (AOTC): Up to $2,500 per student.
• Lifetime Learning Credit: Covers tuition and fees for continued education.

*7. Retirement Savings Contributions Credit (Saver’s Credit)*

• Encourages low-to-moderate-income individuals to save for retirement.
• Credit percentage varies based on income.

Tax Planning Strategies

• Maximize Refundable Credits: Prioritize credits that offer direct refunds.
• Stay Updated on Legislative Changes: Some credits may expire or be adjusted.
• Use Tax Software or Advisors: Ensure eligibility and optimize tax savings.

Tools & Resources

• IRS tax calculators for estimating credits.
• Tax planning software for optimizing deductions.
• Financial advisors for personalized tax strategies.