Nine Tax Credits That Could Save Americans Thousands of Dollars

Taxpayers in 2024 can pivot to leveraging various credits to potentially save money during the tax filing season.

While the financial relief measures given directly to Americans by the federal government in the form of three stimulus checks over the course of 2020 and 2021 was a COVID-era anomaly, the Internal Revenue Service (IRS) offers several annual tax breaks to eligible filers, ranging from support for families and students to green energy initiatives.

Before exploring the credits, it is important to note the nature of them. According to the IRS, tax credits are defined as a dollar-for-dollar amount that taxpayers claim on their tax return to directly reduce the money they owe.

Tax credits can be either refundable or nonrefundable. Refundable credits allow taxpayers to receive the difference if their tax bill is less than the credit amount, potentially increasing their refund. On the other hand, nonrefundable credits can reduce the tax bill to zero but don't offer any refund on the remaining credit amount.

The availability and types of tax credits can vary each tax year, Chris Woodin, lead tax law specialist at the IRS, told Newsweek, adding that "it's crucial for taxpayers to review them carefully when preparing their returns."

Key tax credits include the Child Tax Credit, for which families who earn less than $400,000 per year ($200,000 for single filers) can claim $2,000 per child under 17, according to the IRS, with a refundable portion of $1,600. The credit begins to reduce when individuals earn above the income threshold.

Eligible filers can also claim the Child and Dependent Care Credit, which covers up to 35 percent of care expenses for dependents.

Families considering adoption can benefit from the Adoption Credit, covering up to $15,950 of adoption expenses, with the option to carry forward excess credit for up to five years. The Earned Income Tax Credit assists low- and moderate-income workers with a credit range from $600 to $7,430, depending on family size and income.

For educational expenses, the American Opportunity Tax Credit provides a maximum annual credit of $2,500 per student for the first four years of higher education, while the Lifetime Learning Credit offers up to $2,000 per tax return for various educational costs with no limit on claimable years.

Additionally, the Saver's Credit offers a tax credit between 10 percent and 50 percent of contributions made to retirement plans and ABLE accounts.

The Residential Clean Energy Credit, a push toward green energy, equals 30 percent of the cost for qualified clean energy installations at home. Another eco-friendly initiative is the Electric Vehicle Tax Credit, available for plug-in electric vehicles or fuel-cell vehicles. Starting in January, new and used electric vehicle tax credits will be available at the point of sale, with up to $7,500 for new vehicles and $4,000 for used vehicles.

While the pandemic-related stimulus era ends for most Americans (one-time rebates are still in play in Alabama, Arizona and Minnesota), the IRS says understanding and using the credits can lead to savings during tax filing season.