9 Individual Tax Credits You Can’t Afford to Overlook

Tax credits are the most valuable tax breaks available. Each dollar of credit equals a dollar of tax savings. By comparison, if you're in the 32% federal income tax bracket, each dollar of tax deductions saves you only 32 cents. 

Unfortunately, taxpayers sometimes miss out on tax credits, especially if they're do-it-yourself filers. Claiming credits may require additional tax calculations and more tax forms. But the payoff is usually worth the extra work. Here are eight potentially valuable credits to make sure to claim if you're eligible.

1. The Child Tax Credit

For 2025, the maximum child credit is $2,200 per qualifying child under age 17 at year end. The credit phases out at higher income levels. For 2025, the modified adjusted gross income (MAGI) phaseout ranges begin at:

• $200,000 for single taxpayers and heads of households and
• $400,000 for married couples who file jointly.

For parents with a modest income, the credit for each qualifying child may be partially refundable. That means you can collect the refundable amount even if it exceeds your federal income tax obligation.

2. The Credit for Other Dependents

You may qualify for a credit of up to $500 for a dependent who's not a qualifying child. This credit may apply to a dependent child over the age limit or a dependent elderly parent. It's subject to the same income-based phaseouts as the child credit.

3. The Adoption Credit

If you adopt, you may qualify for the adoption credit or an employer adoption assistance program income exclusion up to the applicable limit. The credit is subject to an income-based phaseout.

Important: You can claim both tax benefits in the same tax year, but you must first claim any allowable exclusion for employer-provided assistance before claiming a credit. And you'll need to reduce the amount of qualified expenses available for the credit by the amount of the exclusion for employer assistance. In other words, you can't claim both an exclusion and a credit for the same expenses.

For 2025, the maximum credit is $17,280 of qualified expenses incurred to adopt an eligible child under age 18 or one who needs special care. Qualified expenses include adoption agency fees, court costs, legal fees, travel costs (including meals and lodging) and re-adoption expenses for a foreign child. For 2025, the MAGI phaseout range for the credit is $259,190 to $299,190. Once your MAGI hits $299,191, you no longer qualify.

Beginning in 2025, a new law makes the adoption tax credit partially refundable up to $5,000. This means that eligible families can receive this portion as a refund even if they owe no federal income tax. Previously, the credit was entirely nonrefundable, limiting its benefit to families with sufficient tax liability. The refundable amount is indexed for inflation but can't be carried forward to future tax years.

The credit is generally claimed in the year that qualified expenses are paid or incurred. However, if the adoption isn't finalized by the end of the tax year, you may claim the credit in the following year or the year the adoption is finalized. For more details, contact your SSB tax advisor.

4. The Child and Dependent Care Credit

If you pay someone to care for your under-age-13 child so you can work, you could be eligible for the dependent care credit. If you're married, your spouse must also work or attend school.

The credit percentage ranges from 20% to 35% of qualifying expenses, depending on your adjusted gross income (AGI). The maximum possible credit ranges from:

• $600 to $1,050 for one qualifying child or
• $1,200 to $2,100 for two or more qualifying children.

You may also qualify for the credit if you incur expenses to take care of another dependent who's physically or mentally unable to care for himself or herself, such as a disabled parent or spouse.

5. Higher Education Tax Credits

Eligible parents can claim one of the following higher education credits for their children in school:

American Opportunity Tax credit (AOTC). The maximum AOTC is $2,500 per student. For example, if you have two kids in college, the maximum credit is $5,000 per year.

Lifetime Learning credit (LLC). The maximum LLC is $2,000 per family. So, if you have two kids in college, the maximum credit is limited to $2,000 per year.

The AOTC is generally preferable to the LLC if you have more than one child in school. However, unlike the AOTC, the LLC is available for more than four years of undergraduate study.

Both credits are phased out based on MAGI. For 2025, the phaseout ranges are:

• $80,000 to $90,000 for single taxpayers and heads of households and
• $160,000 to $180,000 for married couples who file jointly. 

Married couples who file separately aren't eligible for either credit.

Both credits are available for attendance at eligible educational institutions. Most accredited educational institutions qualify. These include colleges, universities, some vocational schools and other post-secondary educational institutions that are eligible to participate in a federal student aid program run by the U.S. Department of Education.

6. Residential Clean Energy Credit 

The rate for the residential clean energy credit is currently 30%. Eligible improvements are often expensive, and there's no income limit. So, the tax savings can be significant.

Qualified expenditures include costs for site preparation, assembly, installation, piping and wiring for the following energy-efficient improvements to a U.S. residence (including a vacation home):

• Qualified solar electricity generating equipment,
• Qualified solar water heating equipment that generates at least 50% of the energy used to heat water for the property,
• Qualified small wind energy equipment,
• Qualified geothermal heat pump equipment and
• Qualified battery storage technology.

You can also claim the credit for qualified fuel cell equipment, but only for your U.S. principal residence. The maximum credit for this equipment is limited to $500 for each half-kilowatt of fuel cell capacity.

Note that expenditures that qualify for these credits increase the tax basis of your home, but you must then reduce the basis by the amount of tax credits claimed.

Important: This credit expires on December 31, 2025. Discuss the latest developments with your SSB tax advisor.

7. Energy-Efficient Home Improvement Credit

Another less-valuable green tax credit is available for minor energy-saving home improvements. The credit rate is 30%. The maximum energy-efficient home improvement credit you can claim each year is:

• $1,200 for so-called "building envelope components" for your U.S. principal residence. These components include insulation, exterior doors (limited to $250 per door and $500 total) and exterior windows and skylights (limited to $600).
• $150 for home energy audits for your U.S. principal residence.
• $2,000 per year for qualified heat pumps, water heaters, biomass stoves or biomass boilers for your U.S. residence, including a vacation home.

You can claim these credits up to the applicable annual limits for every year that you make eligible improvements. However, starting in 2025, no credit is allowed unless the item in question was produced by a qualified manufacturer and you report the product identification number (PIN) for the item on your tax return.

Note that expenditures that qualify for these credits increase the tax basis of your home, but you must then reduce the basis by the amount of tax credits claimed.

Important: This green tax credit also expires on December 31, 2025.

8. The Credit for Overpaid Social Security Taxes

When you work for an employer, Social Security tax is withheld from your paycheck at a rate of 6.2% on income up to a wage ceiling, which is $176,100 for 2025. The employer matches this amount, contributing an equal 6.2% for a total of 12.4%. However, if you work for more than one employer in a year and your combined wages exceed the annual wage ceiling, each employer can withhold Social Security tax independently. This can result in more than the maximum Social Security tax amount being withheld from your paychecks.

That can happen if your combined W-2 earnings from multiple employers for the year exceed the Social Security tax ceiling. If you're in this situation, you can claim a credit for any overpaid Social Security taxes. Your SSB tax advisor can help you recover the excess when you file your 2025 federal income tax return.  

Important: This credit applies only when the overpayment is due to multiple employers. If a single employer over-withheld from your paycheck, you must request a refund directly from the employer.

Maximize Your Credits, Minimize Your Taxes

This article covers only some of the tax credits that are potentially available under current law. Consult your SSB tax professional to explore the full range of tax breaks available to you.

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