Stop Overpaying Your Taxes: The Must-Claim Tax Credits for Working Families

For many working families, tax season feels like a stressful obligation and another set of forms to navigate to survive and move on. But filing your taxes is also an act of financial self-care. It’s one of the few moments each year where you can reclaim money you have already earned and put it back to work for your household.

Too often, families overpay the IRS not because they did anything wrong, but because tax credits are confusing, easy to miss, or poorly explained. The real cost of missing out is not just a smaller refund. It can mean less savings, more reliance on credit cards, and fewer options when unexpected expenses hit.

This WorkMoney guide is here to change that. We will walk you through the must-claim tax credits for working families, explain who qualifies, and show you exactly how to make sure you claim every dollar your family is entitled to.

NOTE: Keep in mind that for the best tax advice for your situation, it’s best to seek out a CPA or other tax expert.

Tax Credits 101: The Difference Between Refundable and Nonrefundable

A common and costly misconception is, “I don’t owe taxes, so credits don’t matter.” In reality, refundable credits can still deliver hundreds or even thousands of dollars back to your household. Skipping them is one of the easiest ways for working families to accidentally overpay the IRS.

Refundable tax credits can put cash in your pocket even if you owe no federal income tax. If the credit is larger than what you owe, the IRS sends you the difference as a refund. For many working families, tax season becomes a meaningful source of extra income. Credits such as the Earned Income Tax Credit and part of the Child Tax Credit fall into this category.

Nonrefundable tax credits work differently. They can lower your tax bill to zero, but they cannot create a refund on their own. If you do not owe much in taxes, part of the credit may go unused. That does not make these credits worthless, but it does mean they tend to benefit higher earners more.

This is why refundable credits matter most for lower- and middle-income households. They are designed to reward work and support families by returning money regardless of how much tax you owe.

The Most Impactful Tax Credits for Working Families (What You’re Entitled To)

Child Tax Credit (CTC)

The Child Tax Credit is one of the most valuable tax breaks for families, but many people do not receive the full amount they qualify for.

To be eligible, your child generally must be under age 17 at the end of the tax year, have a valid Social Security number, and live with you for more than half the year. The credit begins to phase out for higher earners, with reduced amounts once income exceeds IRS limits based on your filing status.

The CTC has both refundable and nonrefundable components. The nonrefundable portion can reduce your tax bill to zero, while the refundable portion, often called the Additional Child Tax Credit, can result in a refund even if you owe little or no tax.

Families often miss out because they assume partial eligibility means it is not worth claiming, misunderstand income phaseouts, or make filing errors, such as missing a Social Security number or incorrectly claiming dependents. Even a partial credit can mean meaningful money back, so it is always worth checking your eligibility.

Child and Dependent Care Credit (CDCC)

If you pay for childcare so you can work or look for work, the Child and Dependent Care Credit can help offset those costs.

Eligible expenses include daycare, preschool, before- or after-school programs, and summer day camps. Care can be provided in a center or in someone’s home, as long as it is not your spouse or another dependent you claim. Overnight camps and tuition for kindergarten or higher grades do not qualify.

The credit is income-based. Lower-income families can claim a higher percentage of their childcare expenses, while the percentage gradually decreases as income rises. Even middle-income households often qualify for meaningful relief, which is why this credit is so commonly overlooked.

To maximize the credit, be sure to save receipts or statements showing the amount paid, the provider’s name and address, and their tax identification number or Social Security number. Having this information ready at tax time makes it far easier to claim the full credit.

Credit for Other Dependents (The Overlooked Credit)

The Credit for Other Dependents is designed for families who support loved ones who don’t qualify for the Child Tax Credit. This can include adult children over age 16, aging parents, disabled relatives, or other dependents who live with you and rely on your financial support.

Multigenerational households often miss this credit because they assume tax benefits only apply to young children. Others are unsure whether an adult relative counts as a dependent or worry they will claim something incorrectly, so they skip it altogether.

While this credit is nonrefundable, it can still lower your tax bill by hundreds of dollars and can be claimed alongside other benefits you may already receive. For families supporting more than one generation under the same roof, it’s an important way to reduce taxes and keep more of the money you earn.

Adoption Tax Credit

The Adoption Tax Credit helps offset the high costs families often face when adopting a child. Eligible expenses can include adoption fees, court and legal costs, attorney fees, travel expenses, and other related costs required to complete the adoption.

The credit is income-based and begins to phase out once household income exceeds IRS limits. Families with higher incomes may receive a reduced credit or none at all,

New and Expanded Tax Breaks Families Should Know About

Several tax benefits have been updated or expanded in recent years, offering families new ways to save. It’s important to note which of these are current law versus proposals with limited applicability, so you know what you can safely claim.

Education & 529 Plan Expansions

529 plans are no longer just for college. Families can now use these accounts to pay for qualified K-12 tuition, apprenticeship programs, and certain educational expenses. This expansion allows families to start saving early and plan for education costs beyond high school, reducing future financial strain.

Child Savings-Style Accounts (Jump starting the American Dream Accounts)

These accounts, also known as “Trump Accounts”, are designed to help families save for a child’s future, such as education, first-time home purchases, or other long-term goals. They generally benefit lower- and middle-income households who may not have other dedicated savings plans. Children born between January 1, 2025 and December 31, 2028 can receive a one-time  $1,000 deposit from the Department of Treasury if they have a social security number and open an account.  

No Tax on Tips & No Tax on Overtime

Recent rules clarify that certain types of income, like tips and overtime pay, may not be taxed under specific conditions, reducing your overall tax burden. These rules primarily apply to service workers and hourly employees who receive variable pay. It’s crucial to report income correctly—mistakes can trigger audits or reduce eligibility for other credits.

Car Loan Interest Deduction

Some families may qualify to deduct interest paid on car loans. Many working households overlook this credit because they assume it only applies to large purchases or luxury vehicles. Understanding the eligibility requirements can turn a routine loan into a tax-saving opportunity.

Final Thoughts

Claiming tax credits is not a loophole or a trick. It is your right as a working family, and it is money you have already earned through your labor and contributions to the economy.

When families claim every dollar they are entitled to, taxes become a form of collective power, strengthening household finances and communities at the same time.

WorkMoney exists to stand with working people beyond tax season. We’re here to help you navigate complex systems, claim what is yours, and build lasting financial security with a trusted advocate at your side.

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