Why this matters

Many taxpayers assume they don’t qualify for credits or confuse credits with deductions. That misunderstanding can cost hundreds or thousands of dollars each year. Unlike deductions, which reduce taxable income, tax credits reduce your tax liability dollar‑for‑dollar; refundable credits can generate a refund even if you owe no tax. The good news is that with basic documentation and the correct forms you can claim several often‑missed credits.

This article explains the most commonly missed credits, what each requires, how to document eligibility, what forms to file, and practical steps to fix missed claims (including when to amend). It draws on IRS guidance and practical experience advising clients who frequently benefit from careful credit reviews (IRS guidance: see the EITC, Child Tax Credit, AOTC, Lifetime Learning Credit, and Premium Tax Credit pages linked below).

High‑value credits often missed by individuals

Below are credits that taxpayers commonly overlook, who they help, and how to claim them.

Earned Income Tax Credit (EITC)

  • Who it helps: Workers with low‑to‑moderate earned income; both those with and without qualifying children may qualify.
  • Why it’s missed: People with irregular income, part‑time work, or recent life changes (marriage, new child, job loss) assume they’re ineligible.
  • How to claim: The EITC is claimed on your Form 1040. You must meet earned‑income and filing‑status rules and, if you were previously disallowed, you may need to file Form 8862 to claim the credit again. Maintain W‑2s, 1099s, and proof of residency for children.
  • Documentation: Pay stubs, employer statements, school records or provider documents proving a child lived with you, and Social Security numbers for all qualifying persons.
  • More detail: See IRS guidance on the Earned Income Tax Credit (EITC) and practical eligibility tests. For site resources, consult our Earned Income Tax Credit (EITC) guide.

Child Tax Credit (CTC) and the refundable portion

  • Who it helps: Taxpayers with qualifying children under the age limit set by law.
  • Why it’s missed: Shifts in law and refundability rules or mixed state/federal treatment cause confusion. Taxpayers also fail to claim the refundable portion when eligible.
  • How to claim: Claim the credit on your Form 1040 and follow IRS worksheets to compute the refundable portion (see IRS CTC pages). Keep birth certificates, school or medical records and Social Security numbers.
  • Documentation and special notes: If you didn’t get the full credit on a previous return, you may be able to amend. For additional details about the refundable portion, see our guide to Claiming the Refundable Portion of the Child Tax Credit.

American Opportunity Tax Credit (AOTC)

  • Who it helps: Students in the first four years of post‑secondary education and their families who pay qualified education expenses.
  • Why it’s missed: Families and students often forget to claim eligible tuition, fees, and required course materials, or they assume the credit is only for full‑time students.
  • How to claim: Complete Form 8863 with your Form 1040. Keep tuition statements (Form 1098‑T), receipts for course materials, and proof of enrollment. Be aware of income phaseouts and the four‑year limit.
  • Documentation: 1098‑T from the school, canceled checks, or receipts for qualified expenses.

Lifetime Learning Credit (LLC)

  • Who it helps: Part‑time and full‑time students taking graduate, undergraduate, or job‑related courses; credit covers a broader range of study than AOTC.
  • Why it’s missed: Taxpayers choose between AOTC and LLC incorrectly; the LLC is nonrefundable and has different income limits.
  • How to claim: Use Form 8863 and review the income phaseout rules. Maintain 1098‑T and receipts for qualifying expenses.

Premium Tax Credit (PTC)

  • Who it helps: Individuals and families who buy Marketplace health insurance and whose household incomes fall within program limits.
  • Why it’s missed: People who mistakenly believe premium tax credits are only for low incomes or who enrolled through an employer plan assume they cannot claim it. Also, reconciliation of advance payments can be confusing.
  • How to claim: File Form 8962 with Form 1040 to reconcile advance premium tax credit payments. Keep Marketplace statements (Form 1095‑A) and income documentation.
  • Documentation: Form 1095‑A from the Health Insurance Marketplace, pay stubs, and income tax returns.

Other commonly overlooked credits

  • Saver’s Credit (retirement contributions for low‑income taxpayers): Claim on Form 8880. Keep IRA or employer plan contribution records. (IRS: Saver’s Credit)
  • Child and Dependent Care Credit: For work‑related care expenses; claim on Form 2441 with receipts from care providers.
  • Residential energy credits for qualifying home improvements: Use Form 5695. Keep contractor invoices and product information.
  • State‑level credits: Many states have credits that don’t mirror federal law; check your state tax department and consider amending state returns when a federal credit changes your tax situation.

Steps to claim credits correctly

  1. Identify potential credits early: At year‑end or when life events occur (birth, education enrollment, job changes), run a quick checklist against the credits above.
  2. Keep targeted records: Create a folder (digital or physical) for receipts, 1098‑T, 1095‑A, W‑2s, 1099s, childcare receipts, and Social Security numbers for dependents.
  3. Use the proper forms: The IRS spells out required forms for each credit—Form 8863 for education credits, Form 8962 for the PTC, Form 8880 for saver’s credit, Form 2441 for childcare, and general claim lines on Form 1040 for many credits. Always follow the instructions for those forms (see IRS forms index).
  4. Double‑check phaseouts and earned income rules: Credits often phase out by adjusted gross income (AGI) and have earned‑income requirements; a small change in income or filing status can change eligibility.
  5. Consider professional help: Tax preparers can spot credits missed by self‑filers. In my practice, running a credits checklist on client returns uncovered missed credits averaging several hundred dollars per household.

How to fix missed credits (amendments and timing)

If you realize you missed a credit after filing, you can generally file an amended return:

  • File Form 1040‑X to amend a federal return and include the forms that support the credit (e.g., Form 8863, Form 8962). The IRS generally allows amendments within three years from the original filing date or two years from the date you paid the tax, whichever is later (check IRS guidance for exceptions).
  • Keep proof of eligibility and documentation in case the IRS asks for additional substantiation.
  • For state returns, review state deadlines and rules; some states allow a different amendment window.
  • For help, our Amending a Return to Claim a Missed Credit guide explains timing, proof, and processing.

Common mistakes to avoid

  • Assuming ineligibility because of small income changes. Many credits have specific earned‑income or filing‑status rules, not blanket income exclusions.
  • Mixing up refundable versus nonrefundable credits—refundable credits can provide a payment even if no tax is owed.
  • Failing to reconcile advance payments such as the PTC; failure to file Form 8962 can delay refunds.
  • Using inadequate documentation for dependents or education expenses.

Practical checklist before filing

  • Collect W‑2s, 1099s, 1098‑T, 1095‑A, childcare receipts, retirement contribution records, and Social Security numbers for all dependents.
  • Run a credits checklist against your life events for the tax year.
  • Confirm the correct form numbers and instructions for each credit on the IRS site.
  • If you use a preparer, provide full documentation and ask them to review potential credits beyond basic withholding calculations.

Sources and further reading

Internal resources (FinHelp):

Professional note and disclaimer

In my practice advising individuals and families, routine reviews for these credits commonly increase client refunds or lower tax bills—sometimes substantially—because taxpayers simply lacked the right documentation or missed an eligible credit when life changed. This article is for educational purposes and does not replace individualized tax advice. For complex situations, recent law changes, or state‑specific rules consult a qualified tax professional or the IRS.