Tax Credits
See how tax credits cut your bill dollar for dollar, and which family and education credits you can claim.
TL;DR
- Subtract a
taxCreditstraight from your bill, dollar for dollar. - Favor
refundablecredits; they can pay you even when you owe nothing. - Check each credit's
incomeLimitbefore assuming you qualify or not.
Credits vs Deductions
Dollar for DollarA credit comes straight off the tax you owe.
$1,000 credit = $1,000 less taxRefundableCan push your tax below zero and pay you the rest.
Owe $500, credit $1,500 = $1,000 backNonrefundableCan cut your tax to zero, but not below it.
Owe $500, credit $1,500 = $0 owedPartly RefundableOnly part of the credit can turn into a refund.
Child credit: up to $1,700 backFamily Credits
Child Tax CreditA credit for each qualifying child under 17 at year end.
Up to $2,200 per childEarned Income CreditA fully refundable credit for low-to-moderate earners.
Up to $8,231 with 3+ kidsChild and Dependent CareCovers part of daycare costs so you can work.
On up to $3,000 (1) or $6,000 (2+)Other DependentsA smaller credit for older kids and relatives you support.
Up to $500 per dependentEducation and Saving Credits
American OpportunityFor the first four years of college, partly refundable.
Up to $2,500 per studentLifetime LearningFor grad school, job training, and any course after year four.
Up to $2,000 per returnOne per StudentYou cannot claim both education credits for the same student.
Compare both, pick the biggerSaver's CreditRewards retirement saving on a low-to-moderate income.
10%-50% of up to $2,000 savedClaim What You Are Owed
File to Get PaidRefundable credits only arrive if you actually file a return.
Low income? File anywayCheck Income LimitsMost credits shrink as your income rises past a threshold.
Child credit fades above $200k / $400kKeep Your ProofSave the forms that back up each credit you claim.
1098-T, daycare receipts, SSNsUse a CheckerTax software and IRS tools flag credits you may miss.
IRS EITC Assistant on irs.govTips
- File a return even if your income is below the filing line, since the
EITCand refundable child credit only pay out if you file. - Contribute to an IRA or 401(k) on a modest income and check the
saversCredit, which pays up to 50% of your first $2,000 saved.
Warnings
- A
nonrefundablecredit can only cut your tax to zero; any leftover amount is usually lost, not refunded. - The federal EV and home energy improvement credits ended after 2025, so do not count on them for
2026purchases.
In Practice
See how a credit shrinks a family's bill, and how much less a same-size deduction would do.
You are married filing jointly with two children under 17 and $90,000 of income in 2026.
- Find taxable income: $90,000 - $32,200 = $57,800.
- Tax before credits: $2,480 at 10% + $3,960 at 12% = $6,440.
- Apply the credit: 2 kids x $2,200 = $4,400, so $6,440 - $4,400 = $2,040.
- Compare: a $4,400 deduction at 12% would save only $528.
The credit cuts your federal tax from $6,440 to $2,040.
A credit is worth its full face value; a deduction is worth only your tax rate.
FAQ
A credit cuts your tax bill dollar for dollar, so a $1,000 credit saves $1,000. A deduction only lowers the income your tax is figured on, so a $1,000 deduction in the 22% bracket saves $220. That makes credits worth far more per dollar.
A refundable credit can reduce your tax below zero, and the IRS pays you the difference as a refund. The Earned Income Tax Credit is fully refundable. The Child Tax Credit is partly refundable, up to $1,700 per child for 2026, while credits like the Lifetime Learning Credit are nonrefundable.
It is worth up to $2,200 per qualifying child under 17, and up to $1,700 of that can come back as a refund. It starts to phase out above $200,000 of income for single filers and $400,000 for married couples filing jointly. Each child needs a valid Social Security number.
For a student in their first four years of college, the American Opportunity Tax Credit is usually better: up to $2,500 per student, with up to $1,000 refundable. The Lifetime Learning Credit is worth up to $2,000 per return and covers grad school and job courses. You can claim only one per student per year.