Low- and moderate-income working families, particularly those with children, benefit the most from refundable tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC),. While higher-income earners receive larger total dollar amounts in non-refundable credits, lower-income households see the highest relative benefit, with refundable credits providing essential financial support for basic needs.
Tax Expenditures Tend to Benefit Wealthier Taxpayers
For example, households in the lower income quintiles receive most of their benefits from the earned income tax credit and child tax credit.
Lower-income taxpayers are eligible to receive a credit of up to $1,700 per child, although they may receive less depending on their earned income. In contrast, higher-income taxpayers, with sufficient income tax liability, are eligible for up to a $2,000 credit per child.
The Earned Income Tax Credit (EITC) helps low- to moderate-income workers and families get a tax break. If you qualify, you can use the credit to reduce the taxes you owe – and maybe increase your refund.
A tax credit doesn't reduce your taxable income. Instead, it lowers the amount of taxes you might otherwise owe.
A tax credit is a dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe. Eligible taxpayers can use them to reduce their tax bill and potentially increase their refund.
A recent tax law ("One Big Beautiful Bill") introduced a new $6,000 bonus deduction for Americans aged 65 and older, available for tax years 2025-2028, reducing taxable income, not the tax itself, with income phase-outs starting at $75,000 MAGI for singles and $150,000 for joint filers. This deduction adds to existing standard deductions, provides up to $12,000 for couples, and requires a Social Security number and filing status other than Married Filing Separately.
The Maryland Earned Income Tax Credit (EITC) is a benefit for people who work but don't earn a lot of money. The EITC provides up to $4,000 for eligible Marylanders to help lower the taxes you owe or increase your tax refund. The amount you receive will depend on your income and family size.
The $4,000 federal tax credit refers to the Used Clean Vehicle Credit, available for purchasing a qualified pre-owned electric or fuel cell vehicle, equal to 30% of the sale price (up to $4,000) but subject to income limits and vehicle requirements (like model year and purchase price). This credit, established by the Inflation Reduction Act, helps lower your tax bill, not just your taxable income, and requires dealer participation for reporting the sale to the IRS.
Your child tax credit is likely $500 instead of $2,000 because they either turned 17 during the tax year, making them eligible for the Other Dependent Credit, or you might have mistakenly checked a box in your tax software, like saying their SSN isn't valid for employment or that they paid over half their own support, which triggers the lower credit amount, according to TurboTax support, TurboTax support, TurboTax support, and TurboTax support https://ttlc.intuit.index.php/community/taxes/discussion/my-daughter-is-17-but-is-still-jr-in-high-school-why-do-i-only-get-500-for-her-and-not-the-full-2000/00/3423950.
For U.S. taxes, the custodial parent (who the child lives with more) usually claims the child for most benefits, but can sign Form 8332 to let the noncustodial parent claim the Child Tax Credit (CTC); for UK Child Benefit, the parent with the lower income or who isn't claiming other benefits is often best to claim, as it helps their pension record. When parents live apart, the IRS uses tie-breaker rules (longer residency, then higher income) if both claim the child, but generally, the custodial parent claims most credits like Head of Household, EITC, Child & Dependent Care Credit, while the noncustodial parent can get the CTC if released.
You qualify for the full amount of the Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return). Parents and guardians with higher incomes may be eligible to claim a partial credit.
Up to 40% of the American Opportunity credit is refundable. That means up to $1,000 of the American Opportunity credit can be refunded to you, even if your tax liability is zero. This makes the American Opportunity credit potentially more valuable than the Lifetime Learning credit, which is non-refundable.
Taxpayers who are paying someone to take care of their children or another member of household while they work, may qualify for child and dependent care credit regardless of their income. For tax year 2021, the maximum eligible expense for this credit is $8,000 for one child and $16,000 for two or more.
The nonrefundable Child Tax Credit will lower your tax liability down to $0. So you must have a tax liability in order to claim it. If you did not have at least a $4,000 tax liability, you would not be eligible for the entire credit, but you could be eligible for the Additional Child Tax Credit.
To qualify for a tax credit of up to $7,500, a new EV or an eligible plug-in hybrid electric vehicle (PHEV) must have met certain rules: A vehicle's MSRP must not have exceeded certain limits, so pricey EVs like the GMC Hummer EV, Lucid Air, and Tesla Model S didn't qualify.
When you file your taxes, if your income is less than what you told us on your application, you may receive a credit or refund. If your income is more than what you told us on your application, you may have to repay some or all of the advanced premium tax credits that you got.
You're disqualified from the Earned Income Tax Credit (EITC) for having income over the limit, exceeding the investment income cap (e.g., $11,950 in 2025), not having a valid Social Security Number, being a non-citizen/resident alien, claiming the Foreign Earned Income Exclusion, or filing as married filing separately unless you meet specific rules. Other disqualifiers include not meeting age requirements (generally 25-64), being a dependent of someone else, or having prior EITC disallowed due to fraud/error.
The Department of Community Services and Development encourages Californians earning under $31,950 a year to file their taxes to claim the California Earned Income Tax Credit (CalEITC), a cash-back tax credit, and receive a larger tax refund.
The new senior tax deduction of up to $6,000 for single filers and $12,000 for joint filers, was created to help cover taxes on Social Security benefits. Taking the new senior deduction helps to reduce your taxable income, which can mean less tax or potentially an even bigger tax refund when you file your return.
What can I claim if I am over State Pension age or if I have a partner over State Pension age?