2 Tax Credits That Will Be More Generous Next Year For Massachusetts Taxpayers and 5 That Won’t

But these are not the only IRS thresholds that tend to increase annually. Limits on certain federal income tax credits also typically rise each year because they are indexed to inflation.

The IRS has announced that the following tax credits are among those whose limits will rise for the 2025 tax year — the one for which your tax return is due by April 2026.

Unfortunately, many tax credit thresholds don’t get annual inflation adjustments.

This tax credit is for eligible workers. More specifically, it’s for folks with earned income, such as wages.

The earned income credit is refundable. That basically means it not only reduces your tax bill, but it also might result in you receiving a tax refund or receiving a bigger refund than otherwise. So, you can take advantage of the credit regardless of whether you owe taxes, assuming you’re otherwise eligible.

Income limits: The earned income tax credit is only available to folks with low to moderate incomes. For 2025, you might be eligible for it if your adjusted gross income (AGI) is not more than:

• Married filing jointly: $26,214 to $68,675, depending on whether and how many of your children qualify for the credit (up from $25,511 to $66,819 for 2024)
• All other tax-filing statuses: $19,104 to $61,555, depending on whether and how many of your children qualify for the credit (up from $18,591 to $59,899)

Credit limits: For 2025, the maximum amount that this credit is worth ranges from $649 (if you have no qualifying children) to $8,046 (if you have three or more qualifying children). Those amounts have increased from $632 and $7,830, respectively, for 2024.

This tax break is for qualified expenses associated with the legal adoption of an eligible child, such as adoption fees, court costs and attorney fees.

It’s nonrefundable, so it could lower your tax bill but can’t affect your tax refund. In other words, it only helps folks with a tax obligation and thus is essentially worthless to folks expecting a tax refund.

Income limits: For 2025, the maximum value of the adoption credit is available to eligible taxpayers with a modified AGI (found on your tax return) of $259,190 or less (up from $252,150 for 2024). The credit is not available at all to those earning $299,190 or more (up from $292,150). Eligible taxpayers with a modified AGI of more than $259,190 but less than $299,190 can take advantage of the adoption credit in part but not in full.

Credit limits: For 2025, the adoption credit is worth up to $17,280 (up from $16,810 for 2024).

Tax credits with static limits

Unfortunately, the value of most tax credits is being eroded by inflation over time because they lack inflation adjustments.

The following tax credits are examples. Their maximum values remain:

• Child tax credit: $2,000 per eligible child
• Credit for other dependents: $500 per eligible person
• American opportunity tax credit: $2,500 per eligible student
• Lifetime learning credit: $2,000 per tax return
• Retirement savings contributions credit: $1,000 per return for individual taxpayers and $2,000 per return for married couples filing jointly

If you’re wondering whether you’re eligible for a given tax credit, check out the IRS’ free Interactive Tax Assistant tool.

Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar at 978-844-495 to schedule a FREE one hour no obligation.