How Much Do You Know About Refundable Credits?

Hello, and welcome to today's webinar. How do you -- how much do you know about refundable credits? I see it's the top of the hour, and we're so glad you have joined us here today. My name is Christopher Green, and I am a Stakeholder Liaison with the Internal Revenue Service. And I will be your moderator for today's webinar, which is slated for approximately 90 minutes. This webinar offers one IRS Continuing Education credit or CE credit, and participants can earn one IRS CE credit and a related certificate of completion by attending the live broadcast of the webinar for at least 50 minutes after the official top of the hour start time and answering at least three polling questions during the live broadcast. The polling question example to test your pop-up blocker will count as an attendance check towards the polling questions response requirement. 

This webinar will be recorded for future posting and please note, continuing education credit or certificates of completion are not offered if you view any version of our webinars after the live broadcast. Now before we begin, if there is anyone in the audience that is with the media, please send an email to the address on the slide. Please be sure to include your contact information and the news publication you're with and our media relations and stakeholder liaison staff will assist you and answer any questions that you may have. If you are just joining us, I want to quickly mention some virtual webinar housekeeping items. First, closed captioning is available for today's presentation and will be available throughout the webinar. Second, you can download several documents by clicking on the materials drop down arrow on the left side of your screen. We've included technical help documents along with a copy of today's PowerPoint and other resources. And thirdly, if you have a topic-specific question today, please submit it by clicking the ask question drop down arrow to reveal the text box. 

Type your question in the text box and click send. Please do not enter any sensitive or tax payer specific information. During the presentation, we'll take a few breaks to check-in and engage with you, and at those times, a polling style feature will pop up on your screen with the question and multiple choice answers. Select a response you believe is correct by clicking on the radio button next to your selection and then click submit. If you do not get the polling question, this may be because your pop up blocker is on. So please take the moment now to disable your pop up blocker so you can answer the questions. We've included several technical documents that describe how you can disable pop up blockers based on the browser you are using. We have documents for Chrome, Firefox, Microsoft Edge, and Safari for our Mac users. You can access them by clicking on the materials drop down arrow on the left side of your screen. And now without further ado, we're going to take some time and test the polling feature. 

Here is your opportunity to ensure the pop up blocker is not on so you can receive the polling questions throughout today's presentation. So here's your question. How comfortable are you using irs.gov to research tax information and/or resolve tax related issues? Is it a, comfortable; b, I'm not comfortable nor uncomfortable; c, uncomfortable; or is your answer d, I rarely or never use irs.gov. Go ahead and take a moment and click the radio button that corresponds to your answer. And I'll give you a few more seconds to make your selection. Okay, folks. We're going to go ahead and stop the polling now, and let's see how the majority of you responded. Let's see here. I see that 74% of you actually chose b, neither comfortable nor uncomfortable. Hopefully, we can make you comfortable after today's session. If you did not receive the polling question, and were unable to submit your answer, now is the time to check to see if you have your pop up blocker on to make sure you have it turned off. And now that we have concluded our administrative items, we can move along with our session. 

And, again, a big welcome and thank you for joining us for today's session, which is titled how much do you know about refundable credits. This webinar is scheduled for approximately 90 nonstop minutes from the top of the hour. And now let's meet our rock star presenters. Let's meet our presenters. First, we have Ms. Roberson who is a Program Analyst in Return Integrity and Compliance Services with over 18 years of experience at the Internal Revenue Service. She began her career in public accounting as an auditor and accounting manager and has since specialized in refundable credits, advancing compliance, and practitioner outreach initiatives. And second, we have Brian Sartain, who is a Senior Tax Analyst in Return Integrity and Compliance Services and has been with the Internal Revenue Service for over 35 years. He has held numerous positions, including collections manager, revenue officer, senior technical adviser, and, of course, his current position. And with that, I'm going to turn it over to Ms. Roberson to begin our presentation. Ms. Roberson, the floor is yours. 

Thank you so much, Chris. I appreciate the introduction, and I want to take this time to thank everyone for joining us today. I hope everyone's having a wonderful day so far. So today's presentation is how much do you know about refundable credit? By the end of this webinar, you will be able to identify the 2026 eligibility rules for tax returns claiming Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, and Credit for Other Dependents, as well as American Opportunity Tax Credit, Adoption Credit, and the Head of Household filing status. You'll also be able to recognize the responsibilities tax professionals must follow when preparing returns that claim these benefits, differentiate how refundable credits may be affected when first time filers claim them, and apply the IRS tax return preparer toolkit and other useful online resources on irs.gov. Now that's a lot of useful information, right? So let's get this webinar going. I'll start with the 2026 refundable credit eligibility rules for the EITC, CTC, ACTC, ODC, Adoption Credit, and HOH filing status. The main requirement to be eligible for the Earned Income Tax Credit is earned income, of course. 

I know it's obvious, but considering that the EITC and proper payment rate for fiscal year 2025 is 33% for over $21 billion, we cannot take this basic eligibility rules for granted. So let's dive into the Earned Income Tax Credit eligibility rules. I'll start with a general overview of the EITC rules for everyone. For starters, your client must have a valid Social Security Number issued by the due date of the tax return. The Social Security Number is valid for the EITC, unless it was issued after the due date of the tax return, including extensions, or it was issued solely to apply for or receive a federally funded benefit and does not authorize your client to work. Your client must be a US citizen or a resident alien for the entire year.

Also, your client must file a joint return if they are married or meet the special rule for separated spouses. A married client who files as Head of Household or married filing separately could claim EITC only if they had a qualifying child living with them for more than half the year and either live apart from your spouse for the last six months of the year, legally separated according to their state law under a written separation agreement or decree of separate maintenance and did not live in the same household as their spouse at the end of the year. So far, I've tackled a few EITC eligibility rules, I'll now move on to the rest. The remaining four clue -- four rules say, your client must have an adjusted gross income less than the applicable limits. They cannot file Form 2555, Foreign Earned Income. They must have investment income of 12,200 or less. This amount is adjusted for inflation each year. And the last rule states that your client must have earned income as mentioned at the start of our webinar. 

If you need to look up any prior or current tax year EITC amounts, AGI limitation, or investment income limitation, all of this information is available on irs.gov Publication 596. Okay. I just discussed the EITC eligibility rules that apply to all taxpayers. Now let's turn our attention to the EITC eligibility rules for taxpayers who have a qualifying child. The EITC eligibility rules for taxpayers with qualifying children are as follows. Your clients' qualifying children must meet the relationship, age, residency, and joint return test. A qualifying child cannot be claimed by more than one person, and your client cannot be a qualifying child of another taxpayer. Note that it is possible for a child to be the qualifying child of more than one person. If this situation arises, you may need to apply the tiebreaker rules, which we will discuss later in this session. For now, let's continue our review of the eligibility rules for taxpayers with a qualifying child. As I just mentioned, your client's qualifying children must meet the relationship, age, residency, and joint return test. Even as experienced professionals, these tests may be difficult to discuss with your clients. I'm sure many of you have firsthand experience on how challenging this type of discussion can be. 

If you ever encounter this problem, we have several online resources that may help. For example, Publication 4687, paid preparer due diligence, includes some great scenarios to help you navigate these types of discussions. Publication 597, earned income credit, provides everything you need to know about the EITC. Specifically, refer to chapter two, rules if you have a qualifying child, for more information about eligibility rules for qualifying children. And you could always find information on the IRS website. Simply enter qualifying child rule in the search box for more details. Let's pause here for our first brain teaser. We are going to look at a poll question on the Earned Income Tax Credit. Back to you, Chris. 

Absolutely. Audience, here is our first polling question. Your 37 year old client, Chris, would like to claim his two siblings as qualifying children. His older brother, Tony, is a disabled 40 year old. His younger brother, Matt, is a 24 year old full time student. Chris earned $36,500 in the year 2026, and both of his brothers have lived with Chris all year long. Everyone has an eligible Social Security Number. Here's your question. Does Chris's brothers or do Chris's brothers count as qualifying children? Is the answer a, yes, both brothers count as qualifying children; is it b, no, the 40 year old brother is older than Chris, so he doesn't count as a qualifying child; is it c, yes, both brothers meet the age, residency, and relationship test; or the answer d, only the older brother counts as a qualifying child since he's disabled, and the younger brother doesn't meet the age test. 

Take your time with this one. Reread the question and answer in the answers, of course, and click the radio button that answers the question. And if you do not receive or did not receive the polling question, please enter only the letters a, b, c, or d that corresponds with your response in the ask question text box. Now please note that your response is time stamped. And, audience, also, please remember that you need to answer at least three polling questions and participate in the live broadcast from the official start time for at least 50 minutes to earn one IRS CE credit. The polling question example we did at the beginning of this presentation will count towards the requirement. With that, I'll give you a little more time to reread and look at those answers and make your selection or submit your answer in the ask question feature. 

Okay, how are we doing, folks? Do we have your answer in? Alright. I'm going to stop the polling now. Okay, audience. We're stopping the polling, and we're going to share the correct answer on our next slide. And the correct answer here is D. Only the older brother counts as a qualifying child since he's disabled, and the younger brother doesn't meet the age test. So with that, let's see how well you all have done with this question. I hope you had enough time to answer that question. And I can see that 76% of you actually chose D. The correct response is D. Awesome job, folks. That's really good. Ms. Roberson, they're listening in. I'll turn it back over to you. 

Thank you, Chris, and great job, everyone. Now let's talk about the EITC special rules for married taxpayers not filing a joint return. If your client is married and not filing a joint return, they qualify to claim EITC only if they had a qualifying child who lived with them for more than half of the tax year, and they meet one of the following criteria. They lived apart from their spouse for the last six months of the tax year for which EITC is being claimed, or they are legally separated according to their state law under a written separation agreement or decree of separate maintenance and did not live in the same household as their spouse at the end of the tax year for which EITC is being claimed. This rule may impact married clients with a qualifying child who are not filing a joint return. This is another important topic, so let's pause here for our second poll question. Chris, back to you. 

Wow. Audience, it looks like Ms. Roberson is testing your knowledge back to back, so let's knock this one out of the park. Our second poll question states that Jason and his wife, Julie, are separated without a formal written agreement. Julie moved out of their home in April 2025, and they plan to file separate tax returns. Now Jason earned $38,000 for the year and lived with his 21 and 23 year old children. Both children are full time students. Here's your question. Can Jason claim the Earned Income Tax Credit for himself and his children on his tax year 2026 return. Alright, so here are our answers here. Is your answer going to be a, yes. since Jason lived apart from his spouse for the last six months of the year, he can file married filing separate and claim the Earned Income Tax Credit; is your answer b, no, Jason doesn't have a formal written agreement of separation, so he can't claim the EITC; or is your answer c, no, Jason doesn't have any qualifying children since they are over the age of 19. Little tricky here. 

Let's reread this particular question and answers. Take a moment, and then click the radio button that best answers the question. And, again, if you do not receive the polling question, please enter only the letter a, b, or c that corresponds with your response in the ask question text box. Okay, I'll give you a moment here to reread it and make your selection and/or submit your answer in the ask question feature now. And I hope that was plenty of time for you folks to answer that, to reread. We're going to go ahead and stop the polling now and share the correct answer on our next slide. And as you can see, and if you can't see, you can hear the correct answer is a. Yes, since Jason lived apart from his spouse for the last six months of the year, he can file married filing separate and claim the EITC or the Earned Income Tax Credit. So with that, let's see how you all fared with this particular question. And I can see that the majority of you got this one right. Good job. 83% of you actually chose a, so much better than that first one. So congratulate yourself, pat yourself on the back. Ms. Roberson, the audience is paying attention. So now I will turn it back over to you to go over the rules for taxpayers without a qualifying child. 

Thank you, Chris. Great job, everyone. For tax year 2026, taxpayers without a qualifying child must meet the basic EITC qualifications and the following additional rules to claim EITC. Be at least age 25 but under age 65. Note that either spouse can meet this criterion if filing a joint return, cannot be a dependent of another person. They cannot be the qualifying child of another person and must live in one of the 50 states or the District of Columbia for more than one half of the tax year. This rule applies to both spouses if married filing jointly. And just be aware that an exception exists for those serving in the military who were on extended active duty outside The US. That's it. Now I'm going to discuss the EITC tie breaker rules I briefly mentioned earlier. The EITC tiebreaker rules apply when more than one person has the same qualifying child. 

Naturally, the tiebreaker rules do not apply if the other qualifying person is your client's spouse and they are filing a joint return. Under the tiebreaker rules, the child is treated as a qualifying child of the child's parent if only one of the persons who can claim the child is the child's parent, the parent with the highest AGI if the child lived with each parent for the same amount of time during the tax year and the parents do not file a joint return together. The parent with whom the child lived the longest during the tax year if the parents do not file a joint return together, the person with the highest AGI if no parent is eligible to claim the child as a qualifying child, or the person with the highest AGI is at least one parent can claim the child, but neither parent does so. To meet the standard, the person must have an AGI that is higher than any parent who can claim the child. There is a special rule for children of parents who are divorced, separated, or living apart. For more information on this rule and the tiebreaker rules, refer to Publication 596, earned income credit, or Publication 501, dependent standard deduction and filing information on irs.gov. Let's move on to our third poll question. This brings -- this is a brain teaser, of course, and it's about the tie breaker rolls. Back to you, Chris. 

Oh, yeah. We're back, and we're ready, Ms. Roberson. In our third question, we had Sarah. Now she shares a 10 year old son with her ex husband, Ben. They had a 50:50 custody agreement. So the son lived with each parent for exactly six months out of the year. Sarah has an adjusted gross income or AGI of $27,000, and Ben has an AGI of $38,000. Both parents have valid Social Security Numbers. So the question is, who gets to claim the son? Is your answer going to be a, Sarah can claim the son since she is the mother and the son live with her for six months; is it b, Ben can claim the son since the son lived with him for six months and he has a higher income; or is it c, both parents can claim the son since the son live with each for exactly six months. A little tricky this one. And, again, folks, remember your response is time stamped. So let's think about this team, take a second and click the radio button that best answers this question. And, again, if you do not or did not receive the polling question, please enter only the letter a, b, or c that correspond with your response in the ask question text box. 

This one's a little tricky. What do you think it's going to be? I'll give you a few seconds to make your selection or submit your answer in the ask question feature now. And we'll give you a few more seconds. Okay, we're getting all of our responses in. Very good, very good. Alright, folks, let's stop the polling now, and let's share the correct answer on the next slide. Hope you got your answers in there. The actual correct answer to this polling question is going to be b, Ben can claim the son since the son lived with him for six months, and he has a higher income. So with that, let's see how the majority of you actually responded and what I am seeing, 92%. We're just getting better and better and better. 92% of you got that one, fantastic. Ms. Roberson, they're listening in. They're ready. I'll turn it back over to you to continue.. 

Thank you, Chris and excellent. Excellent, everyone. Well, that wraps up our discussion on the Earned Income Tax Credit. Let's move on to the Child Tax Credit, Additional Child Tax Credit, and Credit for Other Dependents. I will start with the eligibility rules for the Child Tax Credit and Additional Child Tax Credit. Like EITC, it's important to ask your client adequate questions to make sure they qualify for these credits. This is especially true with the recent passage of the Working Families Tax Cuts, WFTC Act, commonly known as the One Big Beautiful Bill Act. For the Child Tax Credit or CTC, the bill expanded identification requirements to claim the credit. Beginning tax year 2025, the taxpayer, for at least one spouse, if filing jointly, must provide a work eligible Social Security Number to claim the Child Tax Credit. Additionally, the bill increased the maximum amount of the credit from $2000 to $2,200 per qualifying child, and that amount will adjust annually with inflation beginning 2026. Furthermore, the bill makes permanent the refundable portion of the credit and the phase out threshold of $200,000 or $400,000 for joint filers. 

As expected, there are some rules to consider for the qualifying child. For starters, just like the taxpayer or their spouse, the qualifying child must have a work eligible Social Security Number. The qualifying child must also be under 17 years old at the end of the year. They must be a US citizen, US national, or a resident of The United States. Also, the qualifying child generally lives with the taxpayer for more than half of the tax year. They must not file a joint return with their spouse for the tax year unless it is only to claim a refund of withheld income tax or estimated tax paid. They must not provide over half of their own support for the tax year. The qualifying child must be the taxpayer's son, daughter, stepchild, eligible foster child, brother, half brother, sister, half sister, stepbrother, stepsister, or a descendant of any of them. And, of course, they must qualify to be claimed as a dependent on the return. As a reminder, use Schedule 8812 credits for qualifying children and other dependents to calculate the credit. Okay. Let's move on to our next poll question on the Child Tax Credit. Back to you, Chris. 

Thank you, Ms. Roberson. Folks, time to get fired up for our fourth polling question, which states Tiffany and Carl are married and will file a joint 2026 tax return. Now they earn $95,000 in 2026. Tiffany and her twin 15 year old daughters each have Social Security Numbers valid for employment. Carl, though, has an ITIN. Carl's 14 year old son also has an ITIN and applied for a Social Security Number, but he has not -- he was not issued a Social Security Number valid for employment before the due date of the 2026 return. Based on only the Child Tax Credit, Social Security Number rules, will all three children qualify for the Child Tax Credit? A bit longer here, right? Is your answer going to be a, no, no children are eligible since Carl has an ITIN; is it going to be b, all children are eligible since at least one parent has a Social Security Number; is it going to be c, all children are eligible because all family members will have a Social Security Number when they file their tax return; or is it going to be d, two children are eligible because at least one parent has a Social Security Number, and two of the children have Social Security Numbers. 

Let's see how well you're all listening in. Click on the radio button that best answers the question, or, don't forget, if you did not receive the polling question, please enter only the letter a, b, c, or d that corresponds with the response in the ask question text box. I'll actually give you some more time to make your selection or submit your answer in the ask question feature. This is a bit harder. It was even harder for me to read it. So take some time in your folks and answer the polling question now. Okay, audience. I hope you used your time wisely here because we're going to stop the polling now. Let's share with you the correct answer on our next slide. And the correct answer is actually D. Two children are eligible because at least one parent has a Social Security Number and two of the children have Social Security Numbers. So let's see how you all fared with this particular polling question. I'm seeing that 72% of you got this right. So the majority of you did get this right. That's an impressive response rate. Did drop a little bit, but that's okay. We're hanging in there. Ms. Roberson, I think we can actually move on now. 

Thank you so much, Chris. And, yes, everyone seems to be doing well. Now that we covered the Child Tax Credit, let's go over the eligibility rules for the Credit for Other Dependents for a qualifying person. ODC can provide up to a $500 nonrefundable tax credit per dependent. However, ODC cannot be claimed for anyone who is eligible for the Child Tax Credit. ODC can reduce or, in some cases, eliminate a tax bill. However, the IRS does not refund the taxpayer any portion of the credit that may be left over. Your clients can claim ODC if they can claim the person as a dependent, the dependent cannot be claimed for the Child Tax Credit or Additional Child Tax Credit, and the dependent is a US citizen, US national, or resident of The United States. As I mentioned earlier, a qualifying child for the Child Tax Credit requires a Social Security Number valid for employment. However, a valid Social Security Number is not required for the ODC. The qualifying person for ODC can have any Social Security Number, including one not valid for employment, an individual taxpayer identification number, ITIN, or an adoption taxpayer identification number, 

ATIN. These numbers must be issued by the due date of the tax return including extensions. The credit begins to phase out when the taxpayer's income exceeds $200,000. For married couples filing a joint tax return, the phase out begins at $400,000. That's it. Simple, right? Well, now let's turn our attention to the Adoption Credit. The Adoption Credit helps families offset qualified adoption expenses. Beginning with the tax year 2025, the one big beautiful bill enhanced the credit by making part of it refundable. For tax year 2026, up to $5,120 of the Adoption Credit is refundable. This refundable amount is calculated separately for each eligible child. The refundable amount also helps families without taxable income. That's a big assist for families who have little or no taxable income. Additionally, the bill expanded who may determine whether an adoption is considered special needs. Indian tribal governments now have the same authority as states to make this determination. As a result, both state and Indian tribal government determinations of special needs are recognized for purposes of the Adoption Credit. 

For 2026, the maximum credit and employer provided benefit exclusion increased to $17,670 per child. This amount includes both the refundable and nonrefundable portions. The credit begins to phase out for taxpayers with modified adjusted gross income at $265,080 and is completely phased out at $305,080. With those changes in mind, it's important to understand who is an eligible child and the different types of adoption. To qualify for the Adoption Credit, a child must meet one of the following criteria, be under age 18 or be physically or mentally incapable of self care regardless of the age. For domestic adoptions, the child must be a US citizen or resident. The credit may be claimed in the year after the qualified expenses are paid if the adoption is in process or in the year the adoption becomes final. The credit can also be claimed even if the adoption was unsuccessful. 

For special needs adoption, the child must be a US citizen or resident, and a state or Indian tribal government has determined the child can't or shouldn't be returned to their parents' home and is not likely to be adopted without assistance to the adoptive family. If there were no expenses paid, the credit is claimed in the year the adoption became final. For foreign adoptions, the taxpayer may claim the credit for qualified adoption expenses only in the year the adoption is final for a child who is not a US citizen resident at the time the adoption process begin. Note, for all types of adoption, if the child turns 18 during the year, they are an eligible child for the part of the year they are under age 18. A taxpayer may qualify for the Adoption Credit and exclusions with any filing status such as single, out of household, qualifying surviving spouse, married filing joint, or married filing separate if the exception is met. 

Generally, if the taxpayer is married, they must file jointly to claim the credit or income exclusion for employer provided adoption benefits. But if they lived apart from their house for the last six months and met the support test, they may qualify separately. To qualify for the credit as married filing separate, an eligible child must have resided in the home for more than half of the year, and the taxpayer provided more than half of the cost of maintaining the home. Additionally, taxpayers that file married filing separate may claim the carry forward of unused Adoption Credit even if this exception isn't met, provided they filed a joint return in the year the credit was first allowable. Furthermore, unused Adoption Credit may be carried forward for up to five years beginning the first year after the Adoption Credit was claimed. However, the amount carried forward is nonrefundable. 

That was a lot. Okay. Now we're going to discuss which adoption expenses do and do not qualify. Qualified adoption expenses include reasonable and necessary costs directly related to the legal adoption of an eligible child qualified for the credit. For example, qualified adoption expenses may include adoption agency fee, attorney and court costs, travel costs, including meals and lodging while away from the home, other expenses for the main purposes of the legal adoption, and any expenses paid before identifying an eligible child. Also, qualified expenses for unsuccessful adoptions may still qualify for the credit. And as a reminder, taxpayers with special needs adoptions determined by the state or Indian tribal government qualify for the full amount of the credit even if no expenses were paid. However, not all expenses qualify for the credit. Expenses such as employer reimbursement, costs paid by state or federal programs, the adoption of your spouse's child, and surrogate parental arrangements are excluded. 

Form 8839, qualified adoption expenses, is used to determine the Adoption Credit, refundable and nonrefundable amount, and the amount of the employer provided adoption benefits the taxpayer may exclude from income if applicable. Keep in mind that the taxpayer may claim both the credit and the exclusion, but not for the same expense. Okay. Let's move on to the Adoption Credit income exclusion. The income exclusion allows taxpayers to exclude from taxable income certain employer provided adoption assistant benefits. For 2026, a taxpayer may be able to exclude up to $17,670 from income and claim the credit for additional qualified expenses up to $17,670 as long as the same expenses are not used for both benefits. 

For special needs adoptions, the maximum exclusion may apply even if the taxpayer or their employer didn't pay any qualified adoption expenses, provided the employer has a written qualified adoption assistance program. The exclusion is determined before calculating the Adoption Credits. Therefore, the employer provided benefit amount must be subtracted from income before the adoption tax credit is calculated. Plenty. Plenty, plenty information. But let's take our fifth and final poll question to think a bit more about income exclusions and how to calculate the maximum allowable credit. Back to you, Chris. 

Alright, folks. I know that last polling question was tough, but we can handle the pressure. Let's get this fifth and final polling question correct. So I'll slow down with this one, alright. It states, in 2026, Tina paid $10,000 in qualified adoption expenses, and her employer reimbursed her $4,000. How much can she exclude from income, and what is her maximum credit? Is it a, Tina can exclude $10,000 from her income and her maximum credit is $10,000; is it b, Tina can exclude $4,000 from her income, and her maximum credit is $4,000; is it c, Tina can exclude $4,000 from her income, and her maximum credit is $6,000; or d, Tina can exclude $10,000 from her income and her maximum credit is $6,000. Now click on the radio button that best answers the question. Or if you do not receive the polling question, please enter the letters a, b, c, or d that, of course, correspond with your response in the ask question text box. Of course, your response is time stamped. 

Now I've seen some of your request attendees and heard your call. So I'll give you extra time on this one, but you absolutely must get it right. Do we agree? Okay. I'll take that as a virtual yes. And, no, I am not AI audience. I see what some of you all are saying in the chat. Alright? So I'm not AI. I'm a real person. So go ahead and make your selection now and submit your answer in the ask question feature now. Okay, folks. That should have been plenty of time. Don't you agree? Okay. We're good? Enough time? We're going to stop the polling now and share with you the correct answer on the next slide. And the correct answer is c, Tina can exclude $4,000 from her income, and her maximum credit is $6,000. Now you better have a better response rate, folks, for that amount of time. Let's see how well you have done. Let me look at these polling, numbers here. 86%, that's way better than the last one, chose c the correct response there. So thank you for listening. And, let's go give it back to Ms. Roberson so we can continue to move on. I think they're ready to move on, Ms. Roberson. 

Thank you, Chris. And, yes, everybody knocked it out the park. So now that we have discussed some of our refundable credits, let me briefly go over the Head of Household filing status. For the Head of Household filing status, your client must be unmarried or legally separated under state law as of the last day of the tax year. Exceptions treat some married filers as unmarried if they lived apart from their spouse for the last six months of the year or their spouse was a nonresident alien during the year and have paid more than half the cost of keeping up a home for the year. This includes expenses such as rent, mortgage, interest, property taxes, utilities, and groceries, also, have a qualifying person live with them in the home for more than half of the year except for temporary absences such as school. This can be a child, parent, or other relative who meet certain criteria. 

However, if the qualifying person is your client's dependent parent, the dependent parent doesn't have to live with them. If your client meets these requirements, they can file as Head of Household, which offers favorable tax rates and a higher standard deduction compared to the single filing status. So far, I covered the eligibility requirements for the Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents, Adoption Credit, and Head of Household filing status. Now we are going to have some fun with scenarios. So let me turn the remainder of the presentation over to my colleague. The floor is yours, Brian. 

Okay. Thank you, Ms. Roberson. Alright. Let's take a pause here to go over a scenario involving some of the credits that we discovered. Our scenario is about a tax professional educating a young first time filer about refundable credits and the appropriate filing status that's necessary to claim the credits. Now in our scenario, Christine is a 22 year old part time working college student who wants to claim her two younger siblings for EITC and CTC. She also wants to file as Head of Household because she is the only person with the job. Her mother is unemployed, and her father passed away several years ago. Now as part of their due diligence, our tax professional asked Christine about her earnings, household income and expenses, living arrangements, and the amount of financial support that she provides to the household. 

The purpose of the probing questions is to get information about the household arrangement and the total cost that Christine's family incurs to live. Christine received a small scholarship, and her mother covered the remaining tuition using personal funds, employer and life insurance payments, Social Security death benefits help with household costs. Christine's job allowed her to contribute $400 a month towards the $2,000 in rent that her mother pays. Now with all the information that Christine provided, our tax professional informed Christine that she did not contribute more than half the cost of keeping up the home and therefore could not file as Head of Household. Additionally, the tax professional informed Christine that she did not qualify to claim her siblings for the EITC or CTC because Christine was a qualifying child of her mother. However, because Christine's siblings are qualifying children of her mother and under 17, her mother may claim them for the Child Tax Credit. 

As a general reminder, for taxpayer to file as Head of Household, they must pay more than half the cost of home upkeep, they must be unmarried, legally separated, or considered unmarried under certain exceptions, and have a qualified person that lived with them for more than half the year or a dependent parent that did not live with them. For taxpayer to claim EITC, the qualifying children must have a valid Social Security Number. They must meet the relationship, age, residency, and joint return test. They cannot be claimed by more than one person, and the taxpayer cannot be the qualifying child of another taxpayer. And then finally, for taxpayer to claim the Child Tax Credit, the qualifying children must have a valid Social Security Number, must be a US citizen, US national, or US resident. They must meet the relationship, age, residency, joint return, and support test, and they must qualify to be claimed as a dependent on the return. 

Alright, let's move on to our final credit, the American Opportunity Tax Credit, and then we'll continue with our scenario. Now the American Opportunity Tax Credit or AOTC is a tax credit to help pay for education expenses for the first four years of post secondary education. The amount of the credit is 100% of the first $2,000 of paid qualified education expenses and 25% of the next $2,000 of paid qualified education expenses for each qualified student. Your client can claim AOTC even if they paid for the expenses with a student loan, and they can receive a maximum credit of $2,500 per eligible student. Of this amount, 40% or $1,000 is refundable even if they owe no tax. The AOTC is phased out if your client's modified adjusted gross income exceeds certain levels. The AOTC amount is reduced when the modified AGI is more than 80,000, but AOTC is not allowed when the modified AGI is $90,000 or more. 

These income amounts are doubled for joint filers. So a joint filer may claim a reduced AOTC when the modified AGI is more than $160,000, but they may not claim AOTC if the modified AGI is $180,000 or more. Also, AOTC is not available to taxpayers who are married filing separately. Next, let's cover who qualifies as a student for the AOTC, right. So who is eligible for the American Opportunity Tax Credit? The student can be the taxpayer, their spouse, or a dependent listed on the tax return. Beginning in tax year 2026, the one big beautiful bill expanded the identification requirement to claim the credit. To qualify for the AOTC, your client or their spouse, if they are married filing jointly, and the student, if it's their dependent, must have a work eligible Social Security Number issued before the due date of the tax return, including extensions. 

Additionally, the student must be pursuing a degree, certificate, or other recognized education credential. They must be enrolled at least half time for at least one academic period beginning in the tax year. They must not have completed the first four years of higher education at the beginning of the tax year, must not have been claimed for the AOTC or the former Hope Credit for more than four tax years, and, not have had a felony drug conviction at the end of the tax year. Now please note, schools determine the academic periods. An academic period can be semesters, trimesters, quarters, or any period of study such as a summer school session. For schools that use credit hours and do not have academic terms, the payment period may be treated as an academic period. Now that we reviewed the eligibility requirements for the American Opportunity Tax Credit, let's continue our scenario where our tax professional is answering Christine's questions about whether she qualifies for the AOTC. 

As we know, Christine is a 22 year old college student that works at a hardware store and lives with her mother and two siblings. We learned that Christine did not contribute more than half the cost of keeping up the home and therefore could not file as Head of Household, but had to file as single. Also, although she wanted to claim her 11 and 13 year old siblings for the EITC and CTC, she couldn't do so because Christine was a qualifying child for her mother. Christine's not giving up on receiving some kind of refund. Because she is a college student, she asked the tax professional whether she can claim the American Opportunity Tax Credit. Now our tax professional asked Christine whether she and her mother have work eligible Social Security Numbers, then gathers details about her college enrollment status, first time attendance, how her tuition was paid, and whether she received Form 1098-T from her college, and confirms that she has no felony drug convictions. 

Again, our tax professional is practicing due diligence by asking probing questions to get a clear picture on whether Christine may be eligible to claim the AOTC. Christine shared that she had no felony drug convictions and that this was her first time attending college as a full time student. And although she did not receive Form 1098-T in the mail, the information is available online. She also reminded our tax professional that she received a small scholarship to help with college, but her mother paid $7,000 of the remaining annual tuition. Based on all the information Christine provided, our tax professional informed Christine that she could not claim the AOTC. However, the tax professional advised that Christine's mother file an AOTC claim because Christine is her dependent, and both the mother and Christine have a work eligible Social Security Number. 

If Christine's mother did so, her mother may receive the refundable portion up to $1,000 if her mother does not owe any taxes on her income. The tax professional noted that if Christine's mother did not file a return, and Christine could file a return to claim the AOTC, but Christine would not be eligible for the refundable portion because she is 24 and has a living parent who provided most of her support. Generally, a student claiming the AOTC for themselves will not qualify for a refundable amount of the credit if they were under age 18 at the end of the year, or they were age 18 at the end of the year and their unearned income was less than one half of their support, or they were between 18 and 24 at the end of the year, a full time student, and their earned income was less than one half of their support, at least one parent was alive at the end of the year, and then finally, they were filing a return as single, Head of Household, qualifying surviving spouse, or married filing separately. 

Now our two scenarios are examples of how you need to guide your clients with regards to refundable credit eligibility requirements. In our example, Christine had a lot to learn from our tax professional. She expected that she could claim the Head of Household because she's the only person working. She also expected that she could claim her younger siblings for the EITC and Child Tax Credit, and she certainly expected that she could claim the AOTC for herself because she attended college. Unfortunately, our tax professional asked probing questions and clarified that there are other factors to consider when filing as Head of Household or for refundable credits overall. Now I know that was a lot of information. I really appreciate you guys hanging in there with me. Now this is going to, conclude our discussion on the eligibility rules for the Earned Income Tax Credit, the Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents, the American Opportunity Tax Credit, Adoption Credit, and Head of Household filing status. But before we move on to our next topic, 

I want to mention Treasury's latest effort to protect refundable tax credits from abuse. The Treasury and IRS proposed regulations to strengthen enforcement of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 or PRWORA. Now the proposed regulations apply PRWORA to the credits that we discussed today, the Earned Income Tax Credit, the Child Tax Credit, the American Opportunity Tax Credit, and the adoption tax credit. So for tax year 2026, your clients may need to complete Schedule 3A if they are claiming the EITC, the ACTC, and the refundable portions of the AOTC and the Adoption Credit. Please continue to check irs.gov for the latest information about this important requirement. As we mentioned at the start, we're going to share some useful online resources and other educational tools that are available on irs.gov to help with any questions you might have about refundable credits. Everything, of course, starts with irs.gov. 

Go to our landing page and click on tax pros, which you will find on the top right corner of the page. Then on the tax professionals page, click EITC central on the left. On the EITC central page, you will find information about refundable credits if you scroll down to the section other tax benefits. That will take you to the refundable tax credit page where there's more information on the EITC, CTC, AOTC, and Adoption Credit. But that's not all. Under EIT central, you'll find the tax preparer toolkit, an excellent resource that helps you meet your due diligence responsibilities. The tax preparer toolkit provides information on due diligence requirements, articles, publications, examples of various letters, and up to the minute compliance messaging called hot topics. And the IRS has other educational resources and tools to assist you in addition to the tax payer toolkit. 

For example, the IRS document upload tool allows you to securely upload documents to the IRS in response to specific letters, notices, and due diligence audit correspondence. The tool also provides confirmation that IRS received your documents. Go to the IRS website and enter document upload tool to use this application. The EIT assistant helps you determine whether your client qualifies for the credit and estimates the potential refund amount. To use the application, go to the IRS website and enter EITC assistant in the search box. Form 886-H-EIC Toolkit is a great resource if your client find themselves under audit for EITC issues and have received notices or letters from the IRS. The tool provides a list of documents that will need to be submitted to show your client's children meet the relationship, age, and residency tests to verify EITC eligibility. Just go to the IRS website and enter Form 886-H-EIC Toolkit to use the application. 

The interactive tax assistant provides answers to several tax law questions that are specific to an individual circumstance. It can determine filing status, whether income types are taxable, or whether a taxpayer is eligible to claim certain credits or deductions. Some of the credits include the Child Tax Credit, the Credit for Other Dependents, and education credit. Go to the IRS website and enter interactive tax assistant to use the application. The IRS also hosts webinars throughout the year. Many of these webinars offer continuing education credits. To find the current offerings, visit the IRS website and type webinars in the search box. Lastly, IRS has a vast video library available for reference on YouTube. The IRS videos include topics of interest to small businesses, individuals, and tax professionals. To locate IRS videos on YouTube, type IRS in the search box. Our goal, of course, is to provide resources to help you file error free returns. So take advantage of the information on irs.gov as well as our training modules and videos. Yeah, thank you for attending today's webinar, how much do you know about refundable credits. If you have any questions after today's session, you can email us at eitc.program@irs.gov. And remember, visit irs.gov for information about refundable credits. 

Thanks again for attending today's webinar. Hey, folks. I'm back. Christopher Green, your artificial agent. Just kidding, folks. Just kidding. We made it to the fun part of our session here, our live questions and answers section, and I'll, of course, be moderating. But before we start, I want to give a special thank you for attending, engaging -- everyone engaging for today's presentation titled how much do you know about refundable credits? Earlier, I mentioned we want to know what questions you have for our presenters. Well, now is the time to take the opportunity to input your questions. There's still time. So go ahead and click on the drop down arrow next to the ask question field and type in your question and, of course, click send. Now remember, do not enter any sensitive or taxpayer specific information. We do not want to see that. 

Brian is actually going to be staying on with us to answer your questions. And one more thing before we start, we may not have time to answer all of the questions submitted, but we'll answer as many as time has allowed us. So, Brian, let's go ahead go ahead and get started, my friend. Let me pull up and see what questions we have here. Oh, good. So we have an attendee, that has wrote, if a quest -- if a student -- excuse me, if a student has been in college more than four years but hasn't claimed the American Opportunity Tax Credit four times, can they still claim it? Yes. The American Opportunity Tax Credit is limited to four tax years of claims, not four calendar years in school. So if there's fewer than four claims have been made, that credit is still available. 

Thank you for that question, attendee. I'm glad you asked it because I actually took advantage of the American Opportunity Tax Credit when I was in school, and I definitely went for more than four years. Continuing in the same vein here, the next one says, how does the AOTC differ from the lifetime learning credit, Brian? Oh, that's an excellent question. Okay. Unlike the, LLC, the American Opportunity Tax Credit allows taxpayers to include expenses for course related books, supplies, and equipment, but they're not necessarily paid to the educational institution, but are required for attendance. It also differs because you can claim the credit for a maximum of four tax years, whereas the lifetime learning credit has no limit on the number of years it can be claimed. 

Very good. Thank you for that information. Let's actually switch gears over to the Earned Income Tax Credit. An attendee says, is a 19 year old high school student eligible, for the Earned Income Tax Credit? Yes. If the student is under 19 at the year-end or under 24, if they're a full time student and they meet the residency and support test, then they are eligible for the Earned Income Tax Credit. Good deal. That's great. Awesome. Awesome. We have another attendee here that writes, I have a client who was 67 at the end of 2026. Her husband passed away in 2026 a few weeks before he turned 65 years old. If all other tests are met, can she claim the EITC on her 2026 tax return? Hopefully, I read that right. 

Yeah. If you meet the age test, you will meet that age test if you were at least age 25, but 65 at the end of 2026, or your spouse was at least age 25 but under age 65 at the time of his death. So based on your question, the husband was 64 when he passed, so the age test is met. Your source of the Publication 596 earned income credit is going to provide you everything you need to know about the EITC .Awesome. We have a question on -- here's the next question. Could the Additional Child Tax Credit be claimed without earned income ?No. It can't. ACTC requires at least $2,500 of earned income for it to be refundable. Okay. Next attendee writes, what might happen to a client's return if there were errors made in claiming the Earned Income Tax Credit? 

Okay. Well, at first, it may take longer for your client to get their refund. They may be audited, and all or part of the EITC may be denied. Perfect. I see that another attendee actually just wrote in here. How can a taxpayer check and see if they've already claimed the AOTC four times? Yeah. They'll need to review their prior tax returns or request a IRS transcript, the Form 4506-T to see if they've claimed it, how many times they've claimed it previously. Very good questions here. Oh, this one looks like it might be a little bit in-depth. What makes a Social Security Number valid to claim the Earned Income Tax Credit? Good question. Alright, a Social Security Number is valid for Earned Income Tax Credit if it was issued on or before the due date of the return, including extensions, and they were a US citizen when the Social Security Number was received, or the Social Security card issue reads valid for work only with INS or DHS authorization, and that authorization is still valid. 

A Social Security Number is not valid for the EITC if the Social Security card reads not valid for work or not valid for employment. However, if the immigration status of the taxpayer, their spouse, or child has changed, so the individual is now a US citizen or permanent resident, they can claim the EITC if their immigration status changed before the due date of the return, including extensions, and they can ask the Social Security Administration for a Social Security card without the legend. Wow. There's a lot of meat on that bone there. Thank you for that, answering that question there. Moving forward, another attendee writes, can parents choose who claims the child under the EITC tiebreaker rules? 

I've been asked this one before. No, parents can't choose who claims the child under the EITC tiebreaker rules. These rules are mandatory. If one parent meets the requirements of the tie breaker rules, that parent is the one that claimed the child for EITC purposes. The other parent can't claim any of the tax benefits for that child unless that parent has a different qualifying child. Wonderful. This one might be a little deep as well. Attendee writes, can you summarize who is a qualifying child for the Child Tax Credit and the Additional Child Tax Credit? Okay. Yeah. This one will take a little bit. Just like the taxpayer or their spouse, the qualifying child must have a work eligible Social Security Number. The qualifying child must also be under 17 years old at the end of the year. They must be a US citizen, US national, or a resident of The United States. 

The qualifying child generally lives with the taxpayer for more than half the tax year. They must not file a joint return with their spouse for the tax year unless it is only to claim a refund of withheld income tax or estimated tax paid, and they must not provide over half of their own support for the tax year. The qualifying child must be the taxpayer's son, daughter, stepchild, eligible foster child, brother, half brother, sister, half sister, stepbrother, stepsister, or a descendant of any of those. And, of course, they must qualify to be claimed as a dependent on the return. Fantastic. Really, thank you for answering that. That was a deep one. Hopefully, the audience is taking notes here. The questions are pouring in here. The next question I have for you, Brian, is, can a taxpayer e-file, you know, with a dependent who was previously claimed if they use an IP PIN? 

Yes. With a valid IP PIN, the IRS now allows e-filing even if the dependent was claimed elsewhere. Fantastic. I think this might be the last question that we can get to. Can you tell us what qualifies as education expenses? Qualified expenses are going to be amounts paid for tuition fees and other related expenses for an eligible student that are required for enrollment or attendance at a eligible education institution. You must pay the qualified education expenses for an academic period that starts during the tax year or the first three months of the next tax year. Eligible expenses also are going to include student activity fees that you are required to pay to enroll or attend the school. 

For example, an activity fee that all students are required to pay to fund on campus student organizations and activities. Now for AOTC only, expenses for books, supplies, and equipment that the student needs for a course of study are included in qualified education expenses even if it's not paid to the school. For example, the cost of a required course book that's bought from an off campus bookstore is a qualified education expense. Fantastic. Fantastic. Audience, I'm sorry. That's all the time that we have for your questions. Thank you, Brian, for answering those questions and sharing your knowledge and expertise today. Brian, I'm going to actually send it back over to you for some key takeaways from today's webinar. Alright. Thank you. Well, some key points to take away from today's webinar for EITC are listed on the slide. You know, the taxpayer must have investment income of $12,200 or less, which is adjusted for inflation each year. They can claim EITC without a qualifying child when the qualifying child does not have a valid Social Security Number. And married but separated spouses who do not file a joint return may qualify to claim EITC. 

Now for the ODC, the taxpayers that are being claimed must have a taxpayer identification number, but this can be an SSN, ITIN, or ATIN. And, additionally, qualifying dependent for ODC can be over 16 years old, unlike the CTC where the taxpayer or at least one spouse, and each qualifying child must have a work eligible Social Security Number. Next slide, please. And then the key points to remember for Head of Household is you must be unmarried, legally separated, or considered unmarried under certain exceptions and have a qualifying person that's living with them unless it's the parent. You must have paid more than half the cost of home upkeep. And then if your client meets the requirements, they can file as Head of Household, which offers favorable tax rates and a higher standard deduction when compared to the single filing status. 

Now a taxpayer may qualify for the Adoption Credit and the exclusions with any filing status, such as single Head of Household, qualifying surviving spouse, married filing joint or married filing separate if the exception is met. And the American Opportunity Tax Credit has a maximum credit of $2,500. $1,000 of this can be fully refunded if your client does not have any federal tax liability. This credit can be claimed from the taxpayer, their spouse, or their dependent for any who meets the requirement to take the AOTC. Now for tax year 2026, the One Big Beautiful Bill Act enhanced the identification requirements to claim the American Opportunity Credit and the Lifetime Learning Credit. The taxpayer or at least one spouse, if they're married filing jointly, and the student, if they're being claimed as a dependent, must have a work eligible Social Security Number. Audience, that's our time for today. I thank you for your participation. And, Chris, back to you. 

Thank you, Brian, not only for those key points, but for a great presentation along with Ms. Roberson, we haven't forgotten about you. Audience, watch for announcements on future webinars. To register for any upcoming webinar, please visit irs.gov keyword search webinars and select the webinars for tax practitioners or webinars for small businesses. When appropriate, we will offer certificates and CE credit for upcoming webinars. We invite you to visit the IRS YouTube page at www.youtube.com/irs videos for other key video messaging. To access recorded versions of our webinars, click the SL webinar playlist link on the slide handout or contact your local SL or web conference team, to receive the link. Again, continuing education credits or certificates of completion are not offered if you view an archived version of any of our webinars. 

Another big thank you to our presenters, Ms. Roberson and Mr. Sartain, for a great webinar and questions and answer session. I also want to thank you, our attendees, for attending today's webinar. How much do you know about refundable credits? Remember, if you attended today's webinar for at least fifty minutes after the official start time and answered at least three polling questions during the live broadcast, you will receive a certificate of completion for one IRS CE credit. The polling question example will count towards the minimum question response requirement. Certificates of completion will be emailed to the registration email address of qualifying participants as a PDF attachment from the email address seen on this slide. 

Please add this email address to your contacts to ensure you receive the email with the certificate attached. If you qualified for IRS continuing education credit for this webinar and registered with your valid first name, last name, and PTIN as it appears in your IRS PTIN account, your CE credit will be posted in your IRS PTIN account. If you are eligible for continuing education from the California Tax Education Council, your credit will be posted to your CTEC account as well. If you qualify and have not received your certificate and/or credit by October 28, please email us at cl.sl.web.conference.team@irs.gov, the email address shown on the slide. 

If you're interested in finding out who your local stakeholder liaison is, visit irs.gov or send an email to the address shown on this slide, and we'll send you that information. Before you go, we'd appreciate it if you took a few minutes to complete a short evaluation. If you'd like to see more sessions like this one, please let us know. And if you have ideas about how we could make future sessions even better, we'd like to hear those too. We also welcome your suggestions for future webinar topics or information you'd like to be covered in IRS fact sheet, tax tips, or FAQ on irs.gov. Just include your suggestion in the comment section of the survey. 

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