Tax credits to take advantage of, according to experts

Can I claim tax credits? Yes, and equipping yourself with knowledge about tax credits and the latest technological advancements can help you face the tax season with confidence. However, you first need to understand which credits are available, if you qualify for them, and understand how to find the best accountant for your tax needs.

To give you further insight on this upcoming tax season, we spoke with tax experts from Gusto, Yogi CPA, and Accelerate Tax.

What is a tax credit?

“Tax credits are credits that reduce your tax bill on a dollar-for-dollar basis. In many ways, they are more beneficial than business tax deductions, which are reductions to your net income and thereby calculated with a percentage based on your tax record rather than a dollar-for-dollar reduction,” said Zunie Nguyen, founder and CEO of Yogi CPA.

To receive your tax credits, it’s essential to understand the following relevant deadlines. Note that if any of these fall on a weekend or holiday, the due date is typically moved to the next business day. Also, while these are standard, it's always a good idea to verify them each year:

• January 31st: 1099s and W2s sent out
• March 15th: Taxes due for partnerships, multi-member LLCs, and S corps
• April 15th: Taxes due for C corps and individual filings
• September 15th: Taxes due for extended partnerships and S corp returns

How do tax credits work?

Tax credits directly reduce the amount of tax liability you owe to the IRS. Unlike tax deductions, which lower your taxable income, tax credits provide a dollar-for-dollar reduction in the amount of tax you owe. For example, if you're eligible for a $1,000 tax credit, your tax bill will decrease by that exact amount, lowering your final federal income tax obligation.

There are two types of tax credits: Refundable and nonrefundable.

• Refundable tax credits: These allow you to receive a tax refund if the credit exceeds your tax liability. For instance, the Earned Income Tax Credit (EITC) and the Child Tax Credit are both refundable, meaning that if you owe less than the amount of the credit, the IRS will send you the difference as a rebate.
• Nonrefundable tax credits: These can only reduce your tax liability to zero, but not below it. If the credit is larger than your owed taxes, you will lose the remaining amount. Common examples include the Child and Dependent Care Credit and the American Opportunity Tax Credit.

Make sure you meet eligibility criteria for the tax credits you can claim. For example, to qualify for the Child Tax Credit, you must have a qualifying child with a valid social security number. Similarly, filers with lower adjusted gross income (AGI) may also qualify for credits such as the EITC or the Premium Tax Credit.

The IRS requires specific tax forms for claiming certain credits, such as IRS Form 8862 for the Earned Income Credit. Knowing your filing status (whether you're married filing jointly, head of household, or a single filer) can also impact your eligibility for certain credits, as each status has different thresholds for taxable income and credit amounts.

By taking advantage of tax credits, taxpayers can significantly reduce their federal tax return liability, and in some cases, even increase their tax refund. The key is to stay informed about the tax year's changes and ensure you're claiming the maximum eligible credits.

Top tips for maximizing tax credits

Claiming tax credits can significantly reduce your tax liability when you file your tax return. Whether you're a self-employed taxpayer or have qualifying children, there are multiple methods for taking advantage of available tax incentives.

Here are some ways to navigate these opportunities, maximize your savings, and ensure you're making the most of your tax filing.

1. Stay up to date with the latest tax changes

With tax rules changing from year to year, businesses and accountants must stay up to date with the latest policies to get the most out of savings. The IRS is a reliable source for all policy updates.

The technical guidance that the IRS provides to small business owners is unmatched. Although it’s challenging to wade through, you can visit the IRS website, sign up for alerts, and look at the specific legislation or tax codes that apply to your business.

“The IRS is the source of all truth,” Accelerate Tax CEO Steven Cheng pointed out. “It tends to be a little dry, to put it mildly, and hard to wade through, but it can be helpful at times to go to the actual source.”

Accountants can help small business owners stay informed by translating technical guidance and providing updates through newsletters or other forms of communication. Business owners can also stay informed by utilizing technology partners such as Gusto—which provides updates on tax changes that impact payroll, benefits, and other financial aspects—as well as Ramp’s automated accounting platform.

You could also utilize popular accounting software such as QuickBooks, Xero, Sage Intacct, or NetSuite.

“Awareness is key for both accountants and small business owners,” said Gusto’s former Head of Mission and CPA Will Lopez. “I think we’ve seen more changes to the tax law in the last three years than since the founding of our country.”

2. Get familiar with current tax credits & changes

Familiarize yourself with popular tax credits that can be advantageous for business owners:

Employee Retention Credit (ERC)

With the ERC, businesses can claim up to $26,000 per W-2 employee. It’s specifically aimed at businesses that recently experienced a significant reduction in revenue, were affected by government shutdowns, or started a business after Feb 15, 2020.‍‍

“The ERC was passed in the CARES Act along with the Paycheck Protection Program, but it’s quite different from the PPP in that it’s not a loan,” Cheng noted. “It is a tax credit, and it’s structured as a refund on your payroll taxes and certain employer contributions on healthcare expenses.”

R&D credit

Businesses can take advantage of a tax credit for research and development (R&D). This credit doubles as a cash incentive for US businesses to invest in innovation, as they’re encouraged to conduct qualified activities such as research into processes, products, tech, and innovation.

Businesses can use this tax credit to offset payroll taxes by up to $250,000, and under the Inflation Reduction Act, the number increases to $500,000. Pre-revenue startups can also benefit.

If your business has less than $5 million in gross receipts in the past year and less than 5 years of generating gross receipts, you can offset payroll taxes for up to 5 years. Profitable companies can look back at all open tax years to claim potential tax savings.

“What people don’t know is back in 2019, something like $60 billion out of the $92 billion R&D tax credits available went unclaimed,” said Lopez. “So there’s just a tremendous amount of money within R&D that just sits there…like free money just roaming around out there.”

3. Choose a qualified accountant

You have to ask the right questions to find the best accountant for your needs.

Ask what kind of services they provide, Lopez advises. “If they don’t touch a variety of things like taxes, financial stuff, people stuff, people operations—things of that sort, like a good cascading list of services—then you may want to reconsider that individual and say, ‘Well, it sounds like you’re too specialized and I’m looking for something more broad.’”

The right accountant isn’t necessarily the one with the most specialized skills. Businesses need an accountant whose strengths lie in taxes, financial advisory, people advisory, and business ownership. In addition, your accountant needs to align with the future of your business.

“What are your goals?” asked Yogi CPA founder Zunie Nguyen. “I think behind every business owner is a personal goal—what you’re trying to achieve with having this business, if you’re creating a legacy, providing for your employees, your family.”

4. Automate your admin process

Companies’ biggest roadblock during tax season is failing to have their documentation in order. Information such as profit and loss statements, previous payroll taxes paid, and a detailed breakdown of each pay period can be difficult to retrieve without a cloud-based accounting platform.

“Any chance you can get to automate a good portion of your administrative process in order to keep things streamlined, the better,” said Lopez. “You want to cascade modernization across your entire business and look at certain processes that your company has in order to implement the solutions that make sense and keep things above board, streamlined, and integrated.”

Automating your admin process can help ensure these records are organized and easily retrievable.

If you stay informed, understand popular credits, select the right accountant, and automate your admin process—such as using automated expense reporting or automating your cash flow management—you’ll set yourself up for a successful season.

Popular tax credits for 2025 filers—for tax year 2024

"So, what tax credits do I qualify for?" As you prepare for tax filing in 2025, it’s important to be aware of the tax credits available for the 2024 tax year. Current tax credits can help reduce your tax liability and, in some cases, increase your tax refund:

1. Child Tax Credit (CTC)

The CTC can provide substantial savings for parents and guardians of qualifying children. For the 2024 tax year, the credit offers up to $2,000 per qualifying child, with a refundable portion of up to $1,500. The credit is available for children under 17 and is subject to income limitations based on filing status.

2. Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is designed to help low-income taxpayers by offering a refundable credit. The amount of the EITC depends on your adjusted gross income (AGI), filing status, and the number of qualifying children you have. Even if you do not owe taxes, you may be eligible for a refund through this credit. In 2024, the maximum credit is higher for those with three or more qualifying children.

3. American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit is a popular credit for students and families paying for higher education. You can claim up to $2,500 per student for qualified education expenses such as tuition, books, and fees. Up to $1,000 of the credit is refundable, meaning you could receive a refund even if you owe no taxes. This credit is available for the first four years of higher education.

4. Child and Dependent Care Credit

If you pay for the care of a qualifying child or dependent to work or look for work, you may be eligible for the Child and Dependent Care Credit. For the 2024 tax year, you can claim up to 35% of qualifying expenses, depending on your income. The credit is available for up to $3,000 in expenses for one dependent or $6,000 for two or more dependents.

5. Premium Tax Credit

If you purchased health insurance through the Health Insurance Marketplace, you might qualify for the Premium Tax Credit. This refundable credit is designed to help make health insurance more affordable by reducing your monthly premiums. The credit amount is based on your household income and family size.

6. Saver’s Credit

For those contributing to retirement accounts, the Saver’s Credit helps lower-income filers save for the future. The credit is available to individuals who contribute to a 401(k), IRA, or other qualified retirement plans. The maximum credit you can receive is $1,000—or $2,000 for married couples filing jointly—depending on your income level.

Maximize your tax savings with better financial insights from Ramp

Accurate and timely financial reporting is key to identifying potential tax credits and reducing your tax liability. Ramp’s reporting tools automate data collection, giving you real-time access to financial insights that can help you track expenses, ensure accurate deductions, and ultimately boost your tax refund.

By integrating all your financial data into one platform, Ramp makes it easier to stay on top of key details that impact your tax filings.

Let Ramp handle the heavy lifting so you can focus on optimizing your tax strategy and making smarter financial decisions.

Partner offers

• ‍Ardius, a Gusto Company, provides R&D tax credit services. Find out your free estimate.
• ‍Accelerate Tax specializes in helping businesses maximize their refund through the Employee Retention Credit. Businesses that retained their employees during the worst of the pandemic may be eligible to receive up to $26,000 per employee. Claim your refund today.