Maximizing Tax Credits

Credits beat deductions

A $1,000 credit saves $1,000 of tax. A $1,000 deduction saves only your marginal rate. That is why credits are where most family and education planning happens — and why the IRS matches them aggressively when a Social Security number, residency test, or Form 8862 is missing.

Family credits for 2026

• Child Tax Credit: $2,200 per qualifying child under 17. Up to $1,700 can be refundable as the Additional Child Tax Credit. Phase-out still begins at $200,000 MAGI ($400,000 joint).
• Earned Income Tax Credit: maximums are $664 (no children), $4,427 (one), $7,316 (two), and $8,231 (three or more). Joint filers with three children phase out completely at $70,244. Investment income above $12,200 disqualifies the credit.
• Child and Dependent Care Credit: still available for qualifying care so you can work. Keep provider TINs.

Education and other common credits

• American Opportunity Credit: up to $2,500 per eligible student for the first four years of post-secondary education; 40% is refundable.
• Lifetime Learning Credit: up to $2,000 per return, non-refundable, for qualified tuition.
• Adoption credit: up to $17,670 of qualified expenses for 2026, with up to $5,120 refundable.
• Energy-efficient home credits still exist, but the mix of residential energy and clean-vehicle rules changed under 2025 legislation. Confirm the current Form 5695 / 8936 instructions before you buy.

Refundable vs. non-refundable

Refundable credits (EITC, Additional Child Tax Credit, Premium Tax Credit, part of AOTC) can produce a refund even if you owe no tax. Non-refundable credits stop at zero tax. Filing Form 2555 for the foreign earned income exclusion generally blocks the Additional Child Tax Credit — a trap for expats who would otherwise receive a refund.

How to claim without creating an exam

1. Every name, SSN, and date of birth must match SSA records.
2. If the IRS denied EITC, CTC, or AOTC in a prior year, you may need Form 8862 before claiming again.
3. File even if you owe nothing. Refundable credits are left on the table every year because people assume they “don’t need to file.”