If your income is under $40K, the IRS has multiple programs working in your favor — the EITC, the Saver's Credit, and free guided tax prep through IRS Free File and VITA. Many filers leave these on the table. Here's how to claim what you've earned.
Low/moderate-income filers have four high-value moves most skip: (1) claim the EITC — up to $8,046 for families, and available to self-employed earners too; (2) use IRS Free File if your AGI is under $89,000 — federal is free, many state returns too; (3) use VITA for in-person free filing help if your income is under $69,000; (4) contribute to a retirement account and claim the Saver's Credit — up to 50% back on contributions if you qualify. These are IRS programs, not third-party offers.
> Tax disclaimer: ClearValue Lending is not a CPA, tax advisor, or tax attorney. This article is general financial education. Tax rules, credit amounts, and income thresholds change annually — verify current figures at irs.gov or consult a qualified tax professional before filing.
If your income is under $40,000, the tax code has multiple programs working in your favor. Most people in this income range don't itemize (the standard deduction is almost always higher), qualify for the EITC, can file their federal return for free, and may be eligible for a credit just for saving for retirement. The gap between what filers are entitled to and what they actually claim is significant — Brian covers the key moves in the @clearvaluetax9382 video above.
This companion piece adds the numbers and the eligibility specifics.
The Earned Income Tax Credit (EITC) is a refundable federal tax credit for working individuals and families with low to moderate income. "Refundable" means it can generate a refund beyond what you paid in taxes — even if your tax liability is zero.
For tax year 2025, the maximum EITC by family size (per IRS EITC tables at irs.gov):
Investment income cannot exceed $11,950 to qualify (IRS irs.gov, Publication 596).
Two things most people miss:
1. Self-employed and gig workers qualify. EITC is based on earned income — wages, self-employment income, gig work. If you're freelancing or running a side hustle, your net self-employment income counts. This is especially relevant for early-stage founders and sole proprietors. 2. You have to file to claim it. The IRS doesn't send it automatically. Filing a return — even if you don't otherwise have to — is the only way to collect.
Verify exact thresholds for your filing status at irs.gov before filing.
Post-TCJA, the standard deduction is high enough that itemizing only makes sense if your deductible expenses (mortgage interest, state/local taxes, charitable contributions, medical expenses above the threshold) exceed the standard amount.
For 2025 (per IRS Rev. Proc. 2024-40, irs.gov): - Single filers: $15,000 - Married filing jointly: $30,000 - Head of household: $22,500
For most people earning under $40,000, the standard deduction exceeds what they'd get from itemizing. Take it. Don't spend hours gathering receipts unless your situation is unusual.
IRS Free File (apps.irs.gov/app/freeFile): if your AGI is $89,000 or less, you can file a federal return at no cost using IRS-partnered guided software. This is a real federal program — not a trial, not a limited version. Federal filing is free; state filing depends on the specific provider you choose within the program. Access it through the IRS website, not the provider's homepage, to ensure you're in the free tier.
VITA (Volunteer Income Tax Assistance): if your income is generally $69,000 or below, IRS-certified volunteers prepare and file your return for free in person (irs.gov VITA locator). Useful if you prefer human help or have a more complex situation (self-employment income, multiple W-2s, credits to claim). Find a VITA site near you or call 800-906-9887.
Both programs are run or certified by the IRS directly.
If you contribute to a 401(k), IRA, SEP-IRA, SIMPLE IRA, or ABLE account, you may qualify for the Saver's Credit (Form 8880) — a non-refundable credit on top of any deduction from the contribution itself.
Credit rates for 2024 — per IRS Form 8880 guidance at irs.gov (verify 2025 thresholds at irs.gov): - 50% of contribution: single filers with AGI at or below $23,000 - 20%: single filers with AGI $23,001 to $25,000 - 10%: single filers with AGI $25,001 to $38,250
Maximum qualifying contribution: $2,000 (single) / $4,000 (joint). Maximum credit: $1,000 single / $2,000 joint (IRS Publication 590-A, irs.gov).
If you're in the 50% tier, a $2,000 IRA contribution gives you a $1,000 credit — plus the potential IRA deduction. For low-income earners, this stacks.
Restrictions: you must be 18 or older, not a full-time student, and not claimed as a dependent on someone else's return.
The FTC consistently warns that low-income filers are disproportionately targeted by fraudulent tax preparers and refund-anticipation loan schemes. Red flags: preparers who charge fees based on a percentage of your refund, promise unusually large refunds before reviewing your documents, or ask you to sign a blank return. The FTC's ftc.gov consumer education page on tax scams lists the warning signs. VITA and IRS Free File eliminate the incentive for this class of fraud — there is no paid preparer.
Many small business owners and freelancers start in this income range — especially in year one or two before revenue scales. The same rules apply: EITC is available to self-employed earners, Free File covers most founders in early stages, and the Saver's Credit rewards early retirement contributions regardless of how the income was earned.
One forward-looking note: if you're building a business, your tax filings now become your underwriting record later. Self-employment income reported to the SSA (Social Security Administration) through Schedule SE also builds Social Security benefit credits — an additional reason to report accurately rather than under-report. And net self-employment income on Schedule C — not gross revenue — is what lenders use to evaluate cash flow when you apply for business financing. The CFPB notes at consumerfinance.gov that tax returns are among the most common documents lenders request to verify income. Filing accurately and completely matters before you ever walk into a funding conversation.
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ClearValue Lending is a small business funding platform — not a lender, broker, CPA, or tax advisor. This article is general financial education based on IRS.gov publications current as of May 2026. Credit amounts, income thresholds, and program eligibility rules change annually. Verify all figures at irs.gov or consult a qualified tax professional before filing. Financing is subject to lender partner approval.
To qualify for the EITC in 2025, you must have earned income (wages, self-employment, or gig work), file a return, and meet the income limits for your filing status and number of qualifying children. For single filers with no children, the income limit is $19,104; with one child, $50,434; with two children, $57,310; with three or more children, $61,555. Investment income cannot exceed $11,950. Importantly, self-employed and gig workers qualify — EITC is based on earned income, not just W-2 wages. The maximum credit for 2025 ranges from $649 (no children) to $8,046 (three or more children). Verify your eligibility and the exact 2025-year amounts at irs.gov before filing.
Yes — for federal returns, if your adjusted gross income (AGI) is $89,000 or less. The IRS Free File program (apps.irs.gov/app/freeFile) partners with commercial software providers who offer free guided tax preparation and e-filing for qualifying filers. Federal filing is free; state returns depend on the specific provider you choose — some include free state filing, others charge a separate fee. The IRS Free File program is distinct from paid commercial products the same companies may offer — you access it through the IRS website, not the provider's homepage, to ensure you are in the free tier. Free File Fillable Forms are also available for any income level, but with no guided software.
Yes — and you should file even if your income is below the filing threshold (the 2025 standard deduction of $15,000 for single filers). If you had any federal income tax withheld from a W-2, you can only get that money back by filing a return. More importantly, the EITC is refundable — it can generate a refund even if you owe zero tax. The Child Tax Credit is partially refundable. Filing is the only way to collect a refund you have already earned. There is no penalty for filing when you do not legally have to.
The Saver's Credit (formally the Retirement Savings Contributions Credit, Form 8880) is a non-refundable tax credit for low and moderate-income individuals who contribute to a qualifying retirement account — a 401(k), IRA, SIMPLE IRA, SEP-IRA, or ABLE account. The credit rate depends on your AGI: 50% (AGI at or below $23,000 for single filers in 2024 — verify 2025 thresholds at irs.gov), 20%, or 10%. The maximum qualifying contribution is $2,000 for single filers, making the maximum credit $1,000. This is on top of any deduction you may get for the contribution itself. To claim it, complete Form 8880 and attach it to your Form 1040. You cannot claim the credit if you are under 18, a full-time student, or claimed as a dependent on someone else's return.
Yes, if you qualify for a refundable credit like the EITC or the refundable portion of the Child Tax Credit (Additional Child Tax Credit). Refundable credits can reduce your tax liability below zero, meaning the IRS sends you the difference as a refund. Non-refundable credits (like the Saver's Credit) can only reduce your tax liability to zero — they do not generate a refund beyond what you paid. If you have zero in withholding and zero in tax owed, but qualify for a $3,000 EITC, the IRS will send you a $3,000 refund — but only if you file a return to claim it.