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This Often Overlooked Tax Credit Is Worth More Than Ever in 2025

Forgetting about one key tax credit could cost you in a big way.

By Sarah Sharkey

Edited by Chris Kissell

Updated April 30, 2025

Understanding which tax credits you qualify for can make a big difference in how much you pay to the government. One of the most lucrative tax breaks — the earned income tax credit — is an often overlooked way to build wealth.

It's probably too late to benefit from the credit this tax season. However, you can begin to plan for next year by making sure you understand the following things about the earned income tax credit and how it is becoming more generous in 2025.

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What is the earned income tax credit?

The earned income tax credit (EITC) is designed to help low- to moderate-income households get an extra tax break.

The size of this credit can depend on your income, and whether you have children or dependents, or if you are disabled. You can qualify for the credit even if you do not have children, however.

Ultimately, workers who qualify can use the credit to reduce the amount of taxes they owe, or to potentially increase their refund.

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Who is eligible for the EITC?

Millions of Americans are eligible for the EITC, and many don't realize this opportunity exists for them. Eligibility is based on your adjusted gross income (AGI) and family size.

The IRS has not yet released EITC tables for 2025 that spell out the income requirements for those who want to use this credit. But for 2024, the maximum AGI amounts were:

Up to $59,899 — depending on the number of qualifying children — for those filing single, head of household, married filing separately, or widowed
Up to $66,819 for those filing jointly as a married couple

How much is the EITC worth in 2025?

The value of the EITC on your tax return varies based on the details of your unique situation. Your filing status, household size, and earned income all impact your eligibility.

For example, for the tax year 2025, the credit is worth up to:

$8,046 with three qualifying children
$7,152 with two qualifying children
$4,328 with one qualifying child
$649 with no qualifying children

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How many people fail to claim the EITC?

The EITC can be a lucrative tax credit. So, it's somewhat surprising that around 20% of the taxpayers eligible for the EITC don't claim it, according to the IRS.

The IRS says people who fail to claim the EITC tend to live in nontraditional homes, earn less over time, live in rural areas, or have incomes that do not require them to file a tax return.

How do you claim the EITC?

If you want to claim the EITC, the first step is to file your Form 1040. Within that document, you can elect to claim the EITC. Seniors can also claim the credit if they file Form 1040-SR.

Parents claiming the credit for a qualifying child must also file Schedule EIC, Earned Income Credit.

If you use tax software, it's generally easy to opt-in for the EITC. If you file with a tax professional, make sure you express your interest in claiming this credit.

Can you claim the EITC if someone else is claiming the child as a dependent?

If a child lives with you for more than half the year, you can usually take the EITC for that child even if the other parent claims the child as a dependent.

However, only one parent can claim the child specifically for EITC purposes. So, make sure to communicate with the other parent about this issue for tax purposes.

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Can you claim credits from past years?

If you missed out on claiming this tax credit in past years, consider filing an amended tax return. You can claim the credit on your amended return, which could lead to a refund.

Although this requires some extra work, it could pay off in a big way.