The Taxpayer Times

The Internal Revenue Service recently released Tax Tip 2026-10, outlining several individual tax credits and noting enhancements tied to the One, Big, Beautiful Bill. These credits apply to income earned during the 2025 tax year, reported on returns filed in the 2026 filing season.

This article explains what the IRS highlighted, how these credits function, and why understanding the structure of each credit matters when preparing a tax return.

What the IRS Means by “Tax Credits”

A tax credit reduces income tax dollar for dollar. Unlike deductions, which reduce taxable income, credits directly reduce the amount of tax owed.

Some credits are refundable, meaning a refund may be issued even if no tax is owed. Others are nonrefundable, meaning they can reduce tax to zero but cannot produce a refund. Certain credits are partially refundable, combining both features.

These distinctions determine how a credit appears on a tax return and how it affects the final balance due or refund.

Credits the IRS Highlighted

Child Tax Credit

For the 2025 tax year, the Child Tax Credit is up to $2,200 per qualifying child. Eligibility depends on income, filing status, and whether the child meets specific age and residency requirements.

Child and Dependent Care Credit

This credit may reduce federal income tax for taxpayers who paid child or dependent care expenses while working or actively seeking work. The allowable credit depends on expenses incurred and household income.

Saver’s Credit

Taxpayers who made eligible contributions to an IRA or an employer-sponsored retirement plan may qualify. The maximum credit is $1,000 ($2,000 for married filing jointly), subject to income limits.

Refundable Credits

Earned Income Tax Credit

The Earned Income Tax Credit supports low-to moderate-income workers and families. The amount varies based on income, filing status, and number of qualifying children.

Premium Tax Credit

This refundable credit applies to taxpayers who purchased health insurance through the Health Insurance Marketplace and meet income and eligibility requirements. The credit amount is tied to household income and plan costs.

Fuel Tax Credit

The Fuel Tax Credit may be claimed for fuel used for qualifying off-highway business or farming purposes. It does not apply to personal vehicle use.

Partially Refundable Credits

Additional Child Tax Credit

For 2025, up to $1,700 per qualifying child may be refundable, depending on earned income levels.

Adoption Tax Credit

The maximum adoption credit for 2025 is $17,280 per eligible child, with up to $5,000 refundable. Any nonrefundable portion may be carried forward, but it cannot later create additional refundable amounts.

American Opportunity Tax Credit

This education credit may provide up to $2,500 per eligible student, with up to $1,000 refundable, for qualifying education expenses.

Documentation Still Matters

The IRS emphasizes the importance of maintaining records to support any credit claimed. Eligibility is based on statutory requirements, not estimates or expectations. Proper documentation helps ensure accurate reporting and avoids processing delays.

Closing Thought

IRS Tax Tips are designed to inform taxpayers about how the law works, not to suggest that everyone qualifies for every credit listed. Understanding the structure, limits, and documentation requirements of each credit is essential to preparing an accurate return.

Disclaimer

This article is for general informational purposes only and does not constitute tax advice. Tax credit eligibility depends on individual facts and circumstances. Taxpayers should consult IRS guidance or a qualified tax professional before claiming any credit.