Almost 1 in 5 Eligible Tax-Filers Misses Out on This Valuable Credit

At this point, it's probably best to start focusing on your taxes if you haven't begun to work on your 2023 return. And when doing so, it pays to get your hands on every tax credit you're eligible for so you can reap the maximum amount of savings.

If you're a low or moderate earner, there's one credit in particular you may want to look into. It's called the Earned Income Tax Credit (EITC), and it could end up putting several thousand dollars in your pocket this filing season.

Don't ignore this tax credit

A tax credit is a dollar-for-dollar reduction in your tax liability. If you owe the IRS $500 and claim a $500 credit, your tax bill then gets whittled down to $0. A tax deduction, by contrast, will only exempt some of your earnings from taxes. A $500 tax deduction won't make a $500 tax bill $0 -- it will only whittle it down to a smaller amount based on your tax bracket.

Some tax credits are non-refundable, so the most they can do is reduce your IRS liability to $0. For example, if you owe the IRS $500 but score a $700 non-refundable credit, you'll cancel out your $500 debt but you won't get the remaining $200 paid to you.

The EITC is different in that it's totally refundable. So if you qualify for the credit's maximum value, it could put a lot of money into your wallet.

That said, the IRS estimates that about 20% of people who are eligible for the EITC don't claim it. And there may be a few reasons for that.

First, a lot of eligible people may not realize the credit even exists. Others might fear that claiming it will lead to a tax audit. And some people may not claim the credit because earnings below a certain threshold exempt you from having to file taxes in the first place. But the IRS won't issue the EITC automatically, so if you're someone who doesn't have to file a tax return, you may want to file one to claim the credit.

Remember, the EITC will pay you every dollar you're eligible to claim even if you owe the IRS no tax. So not filing a tax return could mean missing out on a lot of money -- especially when you may be eligible to file your taxes for free.

What could the EITC be worth to you?

The value of the EITC depends on your income and the number of qualifying children you have in your household. You can consult this table to see what the credit might pay you for 2023:

So, let's say you're a single parent with one child in your household and your 2023 income was $44,000. This means you qualify for the EITC. All you need to do is ask for it by filing a tax return. So it's worth taking that step to get a nice payday out of the IRS.

Plus, you should know that the EITC is only one of several credits the IRS makes available to taxpayers. You may find that you're eligible for other credits that pay you to some degree, so it pays to explore your options thoroughly.