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Tax Credits in 2026 – What Still Exists

😘 Why credits are better than deductions

Credits are big. And using them properly on your return can lead to massive savings. Here is the difference between deductions and credits.

If you make $100,000 and are in a 24% tax bracket…

  • A $1,000 deduction reduces your taxable income by $1,000. Since your tax bracket was 24%, you save $240 in taxes.

  • On the other hand, a credit is added back to your tax return in full. So if you earn a $1,000 credit, they add the entire amount back to your return.

It is also important to understand refundable vs. non-refundable.

Most credits are non-refundable. Once your reduce your taxes to $0, you will not receive any additional credit. This means you have to pay taxes in order to get a refund. If you do not pay taxes, or pay very little, you cannot use credits to get additional refunds on top of what you actually paid.

Most unused credits can carry forward to the next year.

Until recently, the best credits had to do with Energy – solar, EVs, and home upgrades. Those all ended after 2025 (more on that at the bottom). Most credits now are standard. There is not a lot of strategy like “Spending On Solar” to get a credit, but they are still good to understand so you don’t miss out.

👶 Child Tax Credit (CTC) & ‘Other’ Dependents

  • Credit Amount: Up to $2,200 per qualifying child. The credit is partially refundable up to $1,700 per child, which means you can still get some of the credit even if you owe $0 in taxes. Note that starting in 2026, both you and the child must have a valid Social Security number to claim it.

  • Eligibility: Available to taxpayers with qualifying children under 17 years old. The credit begins to phase out at $200,000 for single filers and $400,000 for married couples filing jointly.

  • Other: Children over 17 and other persons being supported can qualify as ‘Other Dependents’ and will get you a credit of $500

💳 Dependent Care Credit

  • Credit Amount: For 2026 this credit got better – it is now worth up to 50% of your care expenses (up from 35%), for a maximum credit of $1,500 for one dependent or $3,000 for two or more. The 50% rate is for lower incomes and steps down as you earn more, with a floor of 20%. The maximum expenses counted are still $3,000 for one child or $6,000 for two or more children.

  • Eligibility: The care must be provided to enable you to work (Both parent’s must be working if filing as married). The credit is based on the amount spent on care and your income level.

  • Refundable: Non-refundable. It can only reduce your tax liability to zero.

📲 Earned Income Tax Credit (EITC)

  • Purpose: To assist low & moderate income working individuals and families.

  • Eligibility: Must have earned income from employment or self-employment and meet income limits. The credit amount varies based on income, filing status, and number of qualifying children.

  • Credit Amount: For 2026, the maximum credit is approximately $8,231 for a taxpayer with three or more qualifying children. The amount decreases with higher income and fewer children.

  • Refundable: Fully refundable. You can receive the credit even if you owe no taxes.

📚 American Opportunity Credit (AOTC)

  • Credit Amount: Up to $2,500 per eligible student per year.

  • Eligibility: Available for students pursuing a degree or other recognized education credential. The student must be enrolled at least half-time.

    • Single or Head of Household making $80,000 or less.

    • Married Couples making $160,000 or less.

  • Refundable: 40% refundable, up to $1,000 even if you owe no taxes.

✏️ Lifetime Learning Credit (LLC)

  • Credit Amount: Up to $2,000 per tax return, regardless of the number of students.

  • Eligibility: Available for all years of post-secondary education and for courses to acquire or improve job skills. Income limits similar to AOTC.

  • Refundable: Non-refundable. It can only reduce your tax liability to zero.

🛟 Saver’s Credit

  • Purpose: To incentivize saving for retirement.

  • Eligibility: Available to low & moderate income individuals who contribute to a qualified retirement plan. Income limits apply.

  • Credit Amount: Up to $1,000 for individuals or $2,000 for married couples, depending on your income level and filing status.

  • Refundable: Non-refundable. It can only reduce your tax liability to zero.

🍼 Adoption Credit

Credit Amount: Up to $17,670 per child for 2026 to help cover the cost of adopting a child. New this year, up to $5,000 of it is refundable – so you can get that portion back even if you owe no tax.

Eligibility: Covers qualified adoption expenses like agency fees, court and legal costs, and travel. It begins to phase out at higher incomes (around $265,000 of modified income) and is gone above roughly $305,000.

Refundable: Partially – up to $5,000 is refundable, and the rest can carry forward for up to five years.

🏥 Premium Tax Credit (Health Insurance)

Credit Amount: This one helps pay for health insurance bought through the government marketplace (Healthcare.gov or your state exchange). The amount is based on your income and the cost of coverage in your area.

Eligibility: Available if you buy your own coverage through the marketplace and your income falls in the qualifying range. Heads up for 2026 – the extra pandemic-era subsidies expired at the end of 2025, so premiums went up for a lot of people, and the old income cliff is back (earn over the limit and you can lose the credit entirely).

Refundable: Fully refundable. You can take it in advance to lower your monthly premium instead of waiting for your tax refund.

✌️ Goodbye Energy Credits

Some of the biggest and best credits ended after 2025. There used to be a lot more strategy involved with these. Here is what is now gone:

Electric Vehicle Credits –

  • Expired September 30th, 2025.
  • New Electric Vehicle: Up to $7,500
  • Used Electric Vehicle: Up to $4,000

Residential Energy Credits.

  • Expired December 31st, 2025.
  • Solar / Batteries: Up to 30% of purchase price.
  • Heat Pumps: Up to $2,000
  • Other Home Upgrades: Up to $1,200 total
    • Insulation
    • Windows ($600 max)
    • Exterior doors ($500 max, $250 per door)
    • Central air conditioners, furnaces, water heaters
    • Energy audits (up to $150)

🤔 Parting Thoughts

With the removal of energy credits, most of the current credits now are automatic based on income. As long as you supply documentation, you will be able to take advantage of them easily. No planning required.

As always, thanks so much for reading! If you enjoy reading, please share these articles with anyone (subscribe here) that you feel might benefit.

If you have any additional questions, please reach out. We help individuals and businesses year-round with personal and business tax services.

Thanks,

– Taxman

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