What to Know About 2026 Federal Tax Credits
Tax credits reduce taxes dollar-for-dollar, but some expired for 2026. Some refundable and nonrefundable credits remain. Electric vehicle and home energy credits ended.
WASHINGTON — Federal tax credits could help lower tax bills for many Americans this filing season.
A tax credit is different from a tax deduction, which lowers the amount of an individual's taxable income. Tax credits are often more valuable compared to deductions because they directly reduce your tax bill, dollar-for-dollar.
Tax credits can be nonrefundable, refundable or partially refundable. Here's what to know when filing your taxes this year:
What is a tax credit?
A tax credit is a dollar-for-dollar amount an individual can directly subtract from their tax return to reduce the tax they owe. This can lower the total tax payment or increase the refund amount.
Tax credits are more favorable than tax deductions because they reduce the tax due, not just the amount of taxable income, according to Investopedia.
Tax credits are available for a variety of expenses, including purchasing health insurance through the marketplace, paying for higher education and covering childcare costs.
Federal tax credits for electric vehicle purchases and energy‑efficient home upgrades are no longer available for 2026, after their eligibility deadlines passed in late 2025, according to NerdWallet.
How do refundable tax credits work?
Refundable credits are paid out in full, and a taxpayer also gets a refund for any remaining credit that's still available. Some taxpayers who aren't required to file may still want to do so to claim refundable tax credits.
There are several types of refundable tax credits, such as the Premium Tax Credit, which helps individuals and families cover the cost of health insurance premiums purchased through the health insurance marketplace.
The Earned Income Tax Credit is for low‑ to moderate‑income workers who meet eligibility rules based on income and family size.
For 2026, the IRS increased maximum earned income tax credit amounts to:
- Up to $664 for workers without children.
- Up to $4,427 for those with one qualifying child.
- Up to $7,316 for those with two qualifying children.
- Up to $8,231 for those with three or more qualifying children.
How do nonrefundable tax credits work?
For nonrefundable tax credits, once a taxpayer's amount owed reaches zero, they won't see any leftover amount as a refund.
Some nonrefundable tax credits must be used in the year they are claimed and expire if unused, according to Investopedia. Others, such as the Adoption Credit, may be carried forward to future years.
Nonrefundable tax credits can negatively impact low-income taxpayers because they cannot use the entire amount of the credit.
How do partially refundable credits work?
Some types of credits are partially refundable. One example is the American Opportunity Tax Credit for postsecondary education students.
Under this credit, if a taxpayer reduces their tax liability to zero before using the entire $2,500 credit, the remaining portion may be taken as a refundable credit up to the lesser of 40% of the remaining credit or $1,000, according to Investopedia.
© 2026 WFLA, Nexstar Broadcasting, Inc. All rights reserved.