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Tax credits don't get as much attention as deductions, but they're often more valuable. A deduction lowers your taxable income. A credit cuts your tax bill dollar for dollar, and in some cases, it can even lead to a refund.
Despite that, many retirees and near-retirees skip credits they qualify for simply because they assume they no longer apply once they stop working full-time. It's one of the more overlooked money mistakes in retirement. Here are several tax credits that could still put real money back in your pocket this year.
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The Saver's Credit
The Saver's Credit, formally known as the Retirement Savings Contributions Credit, is one of the most overlooked tax breaks out there. It's designed for low- to moderate-income taxpayers who contribute to retirement accounts like an IRA or 401(k), and can be worth up to $1,000 for single filers or $2,000 for married couples filing jointly.
What surprises many people is that you can still qualify even if you are semi-retired or working part-time. If your income dipped below roughly $79,000 for joint filers, you may now qualify even if you didn't in earlier years. For example, contributing $2,000 to an IRA could result in a credit worth up to $1,000, depending on your income level.
This credit won't be around forever, either. It's scheduled to be replaced by the Saver's Match program starting in 2027, making the current version one of the last chances to claim it.
The Credit for the Elderly or Disabled
Many retirees have never heard of this credit, even though it is specifically designed for taxpayers age 65 and older. That makes it one of the easiest benefits to miss.
The Credit for the Elderly or Disabled applies to individuals who meet certain income requirements, and eligibility is broader than many people expect. Some retirees assume their income is too high or that Social Security automatically disqualifies them, but that is not always the case.
In reality, some middle-income retirees still qualify, especially if a significant portion of their income comes from Social Security rather than taxable withdrawals.
The amount is usually modest, often a few hundred dollars, but it directly reduces your tax bill. Even a smaller credit can make a noticeable difference, especially when combined with other tax breaks.
The Child and Dependent Care Credit
This credit is usually linked to working parents, but it can also apply to grandparents. If you are helping pay for the care of a grandchild so a parent can work, you may be eligible for the Child and Dependent Care Credit, depending on how the arrangement is set up.
The credit allows taxpayers to claim a percentage of qualifying care expenses, up to certain limits. That can mean several hundred dollars in tax savings.
Many grandparents assume they cannot claim this credit because they are not the primary caregiver, but in some cases, financial support for care expenses may still qualify.
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The Premium Tax Credit
For retirees who are not yet eligible for Medicare, the Premium Tax Credit can be one of the most valuable benefits available. It applies to those who buy health insurance through the Affordable Care Act marketplace. This credit helps reduce the cost of monthly health insurance premiums based on income.
Many people receive the credit in advance during the year, which lowers their monthly payments. However, when filing taxes, the final amount is calculated. If your income ended up lower than expected, you may receive additional credit as part of your refund.
The Foreign Tax Credit
Some retirees have investments that generate foreign income, often through mutual funds or exchange-traded funds. When foreign taxes are paid on that income, the Foreign Tax Credit may allow taxpayers to offset those taxes on their U.S. return.
This credit is often overlooked because the amounts involved may seem small, especially if the taxes are automatically withheld. However, even modest credits can add up over time, particularly for retirees with diversified investment portfolios.
It is one of those benefits that is easy to miss simply because it shows up in the fine print on investment statements.
The $6,000 senior deduction
You may also have heard about the new $6,000 senior bonus deduction created by recent tax law changes. While it can provide meaningful savings, it is important to remember that it is a deduction, not a tax credit. That means it reduces taxable income rather than directly reducing your tax bill.
Bottom line
Tax credits can be one of the simplest ways to reduce what you owe or boost your refund and offer meaningful tax relief, but they're also easy to overlook.
Taking a few extra minutes to check your eligibility could mean keeping hundreds of dollars that would otherwise go to the IRS.
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