The IRS is warning taxpayers that billions of dollars in federal credits go unclaimed each year, a persistent gap that spans all age groups and income brackets despite expansive eligibility rules. The Wall Street Journal's Lori Ioannou identified five incentives that are most frequently overlooked, from education and childcare to retirement savings and home energy upgrades, offering households opportunities to reduce their tax bills before the April deadline.
Federal tax data show that many Americans qualify for at least one credit but fail to claim it, often because they are unaware of income thresholds, documentation requirements, or the broader scope of programs they assume no longer apply. The credits range from non-refundable reductions that lower tax liability to fully refundable benefits such as the Earned Income Tax Credit, which can deliver a direct payment even when no income tax is owed.
Education-related expenses remain a major source of missed benefits. The Lifetime Learning Credit, which provides up to $2,000 annually, is available for postgraduate education, professional development, and trade programs, and has no cap on the number of years it can be claimed. Eligibility rules allow single filers earning under $80,000 and joint filers under $160,000 to qualify, yet many assume education credits are restricted to undergraduates.
Young parents are frequently missing out on the Child and Dependent Care Credit, which covers between 20% and 50% of up to $3,000 in expenses for one child or $6,000 for two or more. Qualifying care includes babysitters and summer camps, a category that goes unclaimed by many families who do not realize camp tuition qualifies for tax relief. Both parents must be working or seeking work, and the child must be under 13.
The most substantial gap appears in the Earned Income Tax Credit. Federal studies consistently show that one in five eligible households fails to claim it, despite maximum benefits reaching $8,046 for families with three or more children. Even individuals without dependents can receive up to $649. Eligibility extends to single workers earning up to $61,555 or married filers earning $68,675, meaning millions in the middle-income range qualify but do not file for it.
Retirement incentives are also underutilized. The Retirement Savings Contributions Credit-commonly called the Saver's Credit-provides as much as $1,000 for single filers and $2,000 for couples contributing to IRAs or workplace retirement plans. Many taxpayers are unaware the credit exists at all, while others disqualify themselves by claiming full-time student status or being listed as dependents on another return.
Homeowners face a more imminent deadline. The Energy Efficient Home Improvement Credit, offering up to $3,200 for projects such as insulation, windows, doors, heat pumps, and energy audits, expires at the end of December 2025. Some consumers mistakenly believe federal clean-energy incentives ended years ago, leaving significant credits untouched.
Only one of the five incentives-the Earned Income Tax Credit-is refundable, enabling direct payouts even when tax liability is zero. The rest can only reduce the balance owed. IRS advisers recommend taxpayers maintain documentation such as tuition forms, childcare provider IDs, retirement contribution records, and manufacturer certifications for energy equipment to ensure proper filing.
