2026 Federal Tax Credits
| Credit | Maximum Amount | Key Requirements |
|---|---|---|
| Child Tax Credit | $2,000 per child (under 17) | Phases out above $200K (single) / $400K (MFJ) |
| Child & Dependent Care Credit | Up to $1,050 (1 child) / $2,100 (2+) | Work-related care expenses; income-based percentage |
| Earned Income Tax Credit | Up to $7,830 (3+ children, 2025) | Earned income required; income limits apply |
| American Opportunity Credit | $2,500 per student | First 4 years of college; income limits apply |
| Lifetime Learning Credit | $2,000 per return | Any post-secondary education; income limits apply |
| Retirement Savings Credit (Saver's Credit) | Up to $1,000 ($2,000 MFJ) | Lower-income taxpayers who contribute to retirement accounts |
| Clean Vehicle Credit | Up to $7,500 | New EV purchase; income and vehicle price limits |
2026 California Tax Credits
| Credit | Maximum Amount | Notes |
|---|---|---|
| California EITC (CalEITC) | Up to $3,529 (3+ children, 2024) | Lower income limits than federal EITC |
| Young Child Tax Credit | $1,117 per child under 6 | Available to CalEITC-eligible taxpayers |
| Child & Dependent Care Expenses | Up to $1,128 | California version; different calculation than federal |
| Renter's Credit | $60 (single) / $120 (MFJ) | Must rent primary residence; income limits apply |
| Senior Head of Household Credit | Up to $1,695 | Age 65+; qualifying dependent in prior year |
| New Employee Credit | $3,000 per employee | Hiring from designated groups; enterprise zones |
Business Tax Credits
Key federal business credits for 2026: the Research & Development (R&D) Credit (20% of qualifying research expenses above a base amount), the Work Opportunity Tax Credit (WOTC, up to $9,600 per qualifying employee), the Small Business Health Care Tax Credit (up to 50% of premiums for businesses with fewer than 25 employees), and the Disabled Access Credit ($5,000 for accessibility improvements). California has its own R&D credit and new employee credits that can be used to offset California income tax or even reduce the California franchise tax.
Refundable vs. Non-Refundable Credits
Refundable credits can reduce your tax liability below zero — meaning you receive a refund even if you owe no tax. The federal EITC and the refundable portion of the Child Tax Credit are refundable. Non-refundable credits can only reduce your tax liability to zero — any excess is lost (though some can be carried forward). Most California credits are non-refundable. KDA identifies all available credits for every client and determines whether they are refundable or subject to carryforward rules.
Credit Planning Strategies
KDA's credit planning strategies: (1) Ensure all qualifying children are claimed on the correct return — in divorce situations, the dependency exemption and Child Tax Credit can be allocated between parents. (2) Maximize retirement contributions to qualify for the Saver's Credit. (3) Document R&D activities throughout the year to support the R&D credit. (4) Hire from qualifying groups to maximize the WOTC. (5) Time EV purchases to maximize the Clean Vehicle Credit before income phase-outs apply.
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KDA's licensed CPAs and Enrolled Agents work with California business owners every day. Book a free consultation to see exactly how this applies to your situation.
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