Tax Credits
Dollar-for-dollar credits that reduce your tax bill
What is the American Opportunity Tax Credit?
The American Opportunity Tax Credit gives families up to $2,500 per student for college expenses like tuition, fees, and textbooks. Unlike other education credits, up to $1,000 is refundable, meaning you can get money back even if you owe no taxes. It's available for the first 4 years of college only.
Can I claim both education credits in the same year?
No, you cannot claim both the American Opportunity Credit and Lifetime Learning Credit for the same student in the same year. However, you can claim different credits for different students — for example, AOTC for your undergraduate child and LLC for yourself in graduate school.
Can I get a tax credit for a heat pump or solar panels?
Yes, you can claim a 30% federal tax credit for solar panels through 2032, and a 30% credit for heat pumps up to $2,000 annually through 2032. A $20,000 solar installation could save you $6,000 in taxes, while a $10,000 heat pump could save you $2,000.
How does the Child and Dependent Care Credit work?
The Child and Dependent Care Credit gives working parents 20-35% of qualified care expenses back as a tax credit. For 2026, you can claim up to $3,000 in expenses for one dependent or $6,000 for two or more dependents. A family earning $50,000 with $6,000 in daycare costs would get a $1,200 credit.
How do I know if I qualify for the EITC?
You qualify for EITC if you work (or are married to someone who works) and earn under $63,398 with 3+ kids, $59,187 with 2 kids, $53,057 with 1 kid, or $21,560 with no kids (2026 limits). Even higher earners may qualify - a married couple with 2 kids can earn up to $65,610 and still get some credit.
How does the Child Tax Credit work for 2026?
The 2026 Child Tax Credit provides up to $2,000 per qualifying child under 17, with up to $1,700 refundable even if you owe no taxes. The credit begins phasing out at $200,000 income (MFJ) or $75,000 (single), reducing by $50 for every $1,000 over the limit.
How does the EV tax credit work in 2026?
The federal EV tax credit is worth up to $7,500 for new electric vehicles and $4,000 for used EVs in 2026. However, income limits, final assembly requirements, and battery sourcing rules mean only about 20% of EVs currently qualify for the full credit.
How does the Residential Clean Energy Credit work?
The Residential Clean Energy Credit provides a 30% tax credit for qualifying clean energy systems installed in your home through 2032. For a $20,000 solar panel system, you'd get a $6,000 credit that directly reduces your tax bill dollar-for-dollar.
What is the Credit for the Elderly or Disabled?
The Credit for the Elderly or Disabled provides up to $1,125 for taxpayers 65+ or permanently disabled with limited income. For 2026, single filers must have adjusted gross income under $17,500 and married couples under $25,000 to qualify for the maximum credit.
What is the Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) is a refundable tax credit worth up to $8,046 in 2026 for families with three or more children. It's designed to boost income for working people earning under $66,819 (MFJ with 3+ kids), and the entire credit comes as a cash refund even if you owe no taxes.
What is the Premium Tax Credit for health insurance?
The Premium Tax Credit reduces your health insurance premiums if your income is between 100-400% of the Federal Poverty Level. For 2026, a family of 4 earning $75,000 could save $400-800 per month on premiums, and you can claim it upfront or as a refund on your tax return.
What is the Adoption Tax Credit?
The Adoption Tax Credit allows adoptive parents to claim up to $16,810 per child in 2026 for qualifying adoption expenses. The credit phases out for incomes between $251,160 and $291,160 (MFJ). Unlike deductions, credits reduce your tax bill dollar-for-dollar, and unused amounts can be carried forward for up to 5 years.
What is the difference between a tax deduction and a tax credit?
A tax deduction reduces your taxable income (saving you 10-37% of the deduction amount), while a tax credit directly reduces your tax owed dollar-for-dollar. A $1,000 credit saves you $1,000 in taxes, but a $1,000 deduction saves you only $100-$370 depending on your tax bracket.
What is the Energy Efficient Home Improvement Credit?
The Energy Efficient Home Improvement Credit provides up to $3,200 per year (30% of costs) for qualifying home efficiency upgrades like heat pumps, insulation, and Energy Star windows. The credit has a lifetime limit of $1,200 for most improvements and $2,000 for heat pumps.
What is the Foreign Tax Credit?
The Foreign Tax Credit allows U.S. taxpayers to claim a dollar-for-dollar credit for income taxes paid to foreign governments, preventing double taxation. For 2026, you can claim the credit for foreign taxes on foreign-source income, subject to limitations. The credit can reduce your U.S. tax to zero on that foreign income.
What is the Lifetime Learning Credit?
The Lifetime Learning Credit provides up to $2,000 per tax return (20% of the first $10,000 in qualified education expenses) for undergraduate, graduate, or professional degree courses. Unlike the American Opportunity Credit, there's no limit on years claimed and it covers part-time students.
What is the Saver's Credit (Retirement Savings Contribution Credit)?
The Saver's Credit gives you 10%, 20%, or 50% of your retirement contributions back as a tax credit, up to $1,000 for singles or $2,000 for married couples. You qualify if your 2026 income is under $76,500 (married) or $38,250 (single) and you contribute to a 401(k), IRA, or similar retirement plan.
What tax credits am I missing?
Most taxpayers miss 1-3 available credits worth $460-$2,100 on average. The most commonly missed are the Earned Income Tax Credit (up to $7,430), Saver's Credit (up to $1,000), American Opportunity Tax Credit (up to $2,500), and the Additional Child Tax Credit (up to $1,600 per child).