Tax credits and getting a refund

Many people in the US pay too much in federal income tax throughout the year through payroll withholding. The solution is simple: file a tax return to claim your refund. But refunds are only part of the story. Tax credits—which can reduce your bill by hundreds or thousands of dollars—come with strict eligibility rules. Read on to understand how refunds work, which credits might apply to you, and the key residency and identification barriers that affect immigrants and visa holders.

How Tax Refunds Work

The US federal income tax operates on a pay-as-you-go basis. When you work, your employer withholds a portion of your paycheck and sends it to the IRS based on the filing status and allowances you declare on Form W-4. If more money is withheld from your paychecks than you actually owe in taxes at the end of the year, you receive a refund. In other words, a refund is a return of money you overpaid during the year—not a gift from the government.

To claim your refund, you must file a tax return, even if no one asked you to file. Filing is the only way to reconcile what was withheld versus what you truly owed. If you had a large refund in a previous year, consider adjusting your Form W-4 to reduce withholding; if you owed money, you may want to increase it. This way, you can receive more money in your paycheck each month rather than waiting for a large refund at tax time.

The Two Major Tax Credits to Know

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is a refundable credit that can put significant money back in your pocket. It is designed for working people with low to moderate income. Because it is refundable, you can receive money back even if you owe little or no federal income tax for the year. For example, if your tax liability is zero and you qualify for a $5,000 EITC, you may receive $5,000 as a refund.

To qualify for the EITC, you must have earned income from work. The credit phases in as your earnings increase, reaches a maximum, then phases out at higher income levels. For 2025, families with children can qualify with annual incomes roughly between $25,000 and $68,000, depending on family size and filing status. The amount of credit you receive depends on your earned income, investment income, filing status, and number of qualifying children. Working adults without children can also qualify, though income limits are lower.

Investment income matters: if your investment income (dividends, interest, capital gains) exceeds $11,950 in 2025, you are ineligible for the EITC entirely. The IRS operates what is called the EITC Assistant tool on its website to help you determine eligibility based on your specific situation.

Child Tax Credit (CTC)

The Child Tax Credit is one of the largest tax benefits available. For 2025, you can claim up to $2,200 per qualifying child under age 17. A portion of this credit—up to $1,700 per child in 2025—is refundable, meaning you may receive money back even if you owe no tax. To qualify, the child must be under 17 on December 31 of the tax year, must live with you for more than half the year, and must be a US citizen, national, or resident alien. The child must also be your biological child, adopted child, stepchild, grandchild, or sibling (or descendant thereof).

Unlike the EITC, the Child Tax Credit requires that you have earned income of more than $2,500. The credit also phases out as your income rises. Important: you need a minimum income to qualify, and the IRS reduces the credit if your modified adjusted gross income exceeds certain thresholds based on your filing status.

SSN, ITIN, and Residency: Critical Eligibility Barriers

Social Security Numbers (SSN) and the EITC

To claim the Earned Income Tax Credit, you must have a valid Social Security Number. If you use an Individual Taxpayer Identification Number (ITIN) instead, you are ineligible for the federal EITC, even if you have qualifying children with valid SSNs. This is a hard rule: if either you or your spouse (if filing jointly) has an ITIN, you cannot claim the EITC. Some states do offer their own earned income credits to ITIN filers, so check your state's rules.

Social Security Numbers and the Child Tax Credit

The Child Tax Credit requires that the child claiming the credit have a valid Social Security Number. As of 2025, it also requires that at least one of the tax filers (the parent or guardian claiming the child) have a valid SSN. If neither parent has an SSN—for example, if both parents file with ITINs—you cannot claim the Child Tax Credit or the refundable portion (Additional Child Tax Credit), even if your child has a valid SSN.

For purposes of these credits, a valid SSN means one that authorizes work. Some SSN cards are marked 'Not valid for employment' and do not qualify for the refundable portions of these credits. If you are uncertain whether your SSN qualifies, contact the IRS at 1-800-829-1040.

Resident vs. Nonresident Alien Status

Your tax residency status in the US affects which credits you can claim. You are a resident alien for US tax purposes if you hold a green card (lawful permanent resident status) or if you pass the substantial presence test—which generally means you were physically present in the US for at least 183 days in the current year, or a weighted formula of days over the past three years. A nonresident alien is someone who has not met either of these tests.

To claim the EITC, you must be a US citizen or resident alien for the entire tax year. If you were a nonresident alien for any part of the year, you can only claim the EITC if you are married filing jointly, your spouse is a US citizen or resident alien, and you both elect to be treated as US residents. Nonresident aliens generally cannot claim most major tax credits.

Resident aliens (including green card holders) are eligible for the same tax credits and deductions as US citizens, including the EITC and Child Tax Credit, assuming they meet all other requirements.

Understanding ITIN

An Individual Taxpayer Identification Number (ITIN) is a nine-digit number issued by the IRS to individuals who need to file taxes but do not qualify for a Social Security Number. ITINs are used by certain immigrants, visa holders, and others without work authorization. You can apply for an ITIN by filing Form W-7 with the IRS, along with your tax return and documents verifying your identity and foreign status.

If you hold an ITIN, know that you are excluded from the federal EITC and cannot claim the refundable portion of the Child Tax Credit. However, you may be eligible for the non-refundable Credit for Other Dependents (worth $500 per dependent), and some state-level credits may be available depending on where you live. A few states have expanded their own earned income credits to include ITIN filers.

When to File and How to Check Eligibility

Most people file their tax return by April 15 of the year following the tax year in question. If you claim the EITC, the IRS holds your refund until mid-February to help prevent fraud. Most refunds are issued by early March if you file electronically and provide direct deposit information.

Before filing, use the IRS EITC Assistant tool to check whether you qualify for the Earned Income Credit. For the Child Tax Credit, review IRS Publication 596 (for EITC rules on SSNs) and Schedule 8812, which explains all of the credit requirements. Many tax preparation software programs and free tax clinics can help you verify eligibility at no cost.