5 IRS tax breaks that could save your family thousands of dollars

For many households, tax season feels like a test you never studied for. You gather receipts, log into your tax software, and hope for the best.

But the truth is that much of what determines your tax bill was decided months ago by how you earned, saved, and spent your money.

The U.S. tax code already includes several deductions and credits aimed squarely at families. The problem is that many people either overlook them or assume they do not qualify. In some cases, missing just one benefit can mean leaving thousands of dollars on the table.

Here are five IRS-recognized strategies families should keep in mind before filing.

Strategy 1: Make the most of the Child Tax Credit

Few tax benefits matter more to families than the Child Tax Credit. Eligible taxpayers can claim up to $2,200 for each qualifying child under age 17, a permanent increase that took effect for the 2025 tax year under the One Big Beautiful Bill.

For some households, part of that credit is refundable, meaning it can increase a refund even if little tax is owed.

Who qualifies for the Child Tax Credit

• The child must be under age 17 by the end of the tax year
• The child must have a qualifying relationship to the taxpayer, such as a son, daughter, or stepchild
• The child must have lived with the taxpayer for more than half the year
• Income limits apply, with the credit phasing out for higher earners
• Shared custody and multigenerational households are common sources of errors

For families with more than one child, this credit alone can significantly reduce a tax bill.

Strategy 2: Use the Child and Dependent Care Credit

Child care is expensive, and the tax code offers some relief for families who need it in order to work. The Child and Dependent Care Credit applies to qualifying expenses such as day care, after-school programs, and in some cases in-home caregivers.

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This credit does not require itemizing deductions, and it can make a noticeable difference for working parents who spend a large share of their income on care.

How the credit is calculated

• Up to $3,000 in expenses for one qualifying person can be used to calculate the credit
• Up to $6,000 for two or more qualifying persons
• The percentage of expenses you can claim depends on income, with lower earners generally receiving a larger benefit
• The credit applies to care for qualifying children and dependent adults

Strategy 3: Reduce taxable income through retirement savings

Retirement accounts remain one of the most reliable ways to lower taxable income while building long-term financial security.

Contributions to traditional employer plans such as 401(k)s and 403(b)s reduce taxable wages before they even appear on a W-2. Traditional IRA contributions may also be deductible, depending on income and whether a workplace plan is available.

Health Savings Accounts offer an additional option, especially for families enrolled in high-deductible health plans. Self-employed workers have even more flexibility through SEP IRAs and solo 401(k) plans, which allow deductions based on a percentage of net self-employment income.

For lower- and middle-income households, retirement contributions may also unlock the Saver’s Credit, which adds another layer of tax relief on top of the deduction itself.

Strategy 4: Use education tax benefits where they apply

Families paying for college or career training may be eligible for education-related tax breaks. The American Opportunity Tax Credit can be worth up to $2,500 per student for the first four years of higher education, and part of it may be refundable.

The Lifetime Learning Credit applies more broadly, including to graduate courses and job-skill programs.

Other education benefits to check

• Some borrowers may deduct interest paid on student loans without itemizing
• Income limits apply, and not all loans qualify
• The American Opportunity Tax Credit requires the student to be enrolled at least half-time
• The Lifetime Learning Credit has no limit on the number of years it can be claimed

Taken together, these benefits can meaningfully offset the cost of tuition and related expenses for households supporting students.

Strategy 5: Decide carefully between the standard deduction and itemizing

Every taxpayer faces the same basic choice: take the standard deduction or itemize deductions. The standard deduction is larger than it used to be, which means many families no longer itemize.

Still, itemizing can make sense for households with substantial deductible expenses. Mortgage interest, state and local taxes within the legal limit, and charitable contributions are among the most common itemized deductions.

When itemizing is worth calculating

• You bought a home and paid significant mortgage interest during the year
• You made large charitable donations
• You faced major unreimbursed medical expenses exceeding a threshold of your income
• Your combined state and local taxes were close to or above the deduction cap

Families who fall into any of these categories should calculate their taxes both ways. Choosing the higher of the two can lead to meaningful savings.

Tax savings rarely come from obscure loopholes. They come from understanding which deductions and credits already exist and applying them correctly. For families, that often means combining multiple strategies rather than relying on just one.

Because many of these benefits depend on income levels and personal circumstances, professional tax advice or reliable tax software can help ensure nothing is missed. The IRSregularly publishes guidance on these provisions through its Tax Tips and official publications, and staying informed can be one of the simplest ways to avoid paying more than necessary.

Related: Arizona retirement taxes explained

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