Tax Credits for Married Couples: What High-Earning Families Still Get in 2026

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

Married couples filing jointly can claim the same federal tax credits as anyone else, including the Child Tax Credit, the child and dependent care credit, the adoption credit and the foreign tax credit, but most of them phase out with income. For 2026, a joint return with $750,000 or more of income typically gets no Child Tax Credit and no adoption credit, and only a small dependent care credit. The credits that still matter at that level are the ones with no income limit: the dependent care credit at its 20% floor, the credit for excess Social Security withheld after a job change, the prior-year AMT credit after an ISO exercise, and the foreign tax credit on a taxable brokerage account.

This guide is written for two-income families in California and Washington with young children, RSUs and a busy calendar. It shows which credits are worth your attention, which are not, and the one benefit election that usually matters more than any credit.

Which credits phase out at a $750,000 household income

Most family credits were designed for middle incomes. The table shows where the common ones land for a married couple filing jointly in 2026.

Sources: IRS Rev. Proc. 2025-32 (Child Tax Credit and adoption credit amounts), IRS Child Tax Credit page and Schedule 8812 (phase-out), and IRC section 21 (dependent care credit).

The college credits (American Opportunity and Lifetime Learning) also carry income limits that households at this level exceed, and your children are years away from tuition anyway. For them, the 529 plan does that job.

A quick word on how credits differ from deductions. A deduction lowers taxable income, so it is worth your marginal rate. A credit lowers the tax itself, dollar for dollar. That is why, for a family in the 37% bracket, a $7,500 pre-tax benefit can be worth more than twice a $1,200 credit, as the example below shows.

The Child Tax Credit at a high joint income: a worked example

Assume a Bay Area couple, a physician and a Genentech scientist, with two children aged 4 and 7 and a 2026 modified adjusted gross income (MAGI) of $850,000.

• Maximum credit: 2 x $2,200 = $4,400.
• Income over the $400,000 threshold: $450,000.
• Reduction: $50 x 450 = $22,500, which is more than $4,400.
• Credit: $0.

The phase-out threshold is not indexed for inflation, so this does not change as salaries rise. If your tax software shows a Child Tax Credit at this income, check the MAGI figure it used.

The dependent care credit versus a dependent care FSA

This is the decision most two-income families with children under 13 actually face each year, usually during open enrollment.

The credit covers care that lets both parents work: daycare, preschool, a nanny, before- and after-school programs and day camps for children under 13. For 2026, the One Big Beautiful Bill Act (section 70405) changed the rate. It starts at 50% and steps down as adjusted gross income rises, but it never falls below 20%. On a joint return the rate reaches the 20% floor once AGI passes $206,000 (derived from the statute: 35% minus one point for each $4,000, or fraction of $4,000, over $150,000). So a $750,000 household gets 20% of up to $6,000 of expenses for two or more children, a maximum credit of $1,200.

The same law raised the dependent care FSA (DCAP) limit to $7,500 per household for 2026, up from $5,000, if your employer’s plan adopts it. Here is the catch: under IRC section 21(c), every dollar you run through the FSA reduces the $3,000 or $6,000 of expenses the credit can use. With a $7,500 FSA, a family with two children has no expenses left for the credit.

Which is worth more for the $850,000 family

Same couple, $30,000 a year in preschool and after-school care. Their federal taxable income is above $768,700, so their federal bracket is 37% for 2026. Both earn more than the $184,500 Social Security wage base, so the FSA saves Medicare tax (1.45% plus the 0.9% Additional Medicare Tax) but not Social Security tax.

At this income the FSA wins, by about $1,750 in federal tax in this example. The credit is not a second helping on top of a full FSA. It only fills the gap when the FSA is smaller than the credit’s expense limit.

Three conditions trip up high earners:

• You must file jointly. Section 21(e)(2) allows the credit to a married taxpayer only on a joint return (with narrow exceptions for spouses living apart). If you are weighing separate returns, read what happens when married couples file separately first.
• Both spouses need earned income, unless one is a full-time student or unable to care for themselves. If one parent steps back from work, see how taxes work for a stay-at-home parent.
• California does not follow most of the 2025 federal law. The FTB says California generally does not conform to it, so ask your payroll team whether the extra $2,500 above $5,000 is treated as California wages. California’s own dependent care credit is limited to federal AGI of $100,000 or less (FTB), so it does not apply at this income. Washington has no wage income tax in 2026, so there is no state question there for now (a new 9.9% Washington income tax on AGI over $1,000,000 starts in 2028, per WA DOR).

Excess Social Security withheld: the credit job changers miss

Social Security tax is 6.2% of wages up to $184,500 for 2026, a maximum of $11,439 per person. Each employer withholds as if it were your only employer. If one spouse changes jobs mid-year, say from Apple to a startup, the combined withholding can exceed the cap. The IRS lets you claim the excess as a credit on your income tax return.

Example: a spouse earns $150,000 at the first employer and $120,000 at the second in 2026.

• First employer withholds 6.2% x $150,000 = $9,300.
• Second employer withholds 6.2% x $120,000 = $7,440.
• Total withheld: $16,740. Maximum owed: $11,439.
• Credit on the joint return: $5,301.

The cap applies to each spouse separately. Two spouses who each stayed with one employer all year have nothing to claim, even if their combined withholding is high. If a single employer over-withholds, the fix is a refund from that employer, not this credit.

The prior-year AMT credit after an ISO exercise

Exercising incentive stock options and holding the shares can create alternative minimum tax in the year of exercise. Much of that AMT is a timing difference, and it becomes a credit you can use in later years when your regular tax is higher than your AMT. You claim it on Form 8801, and any unused amount carries forward.

The common mistake is losing track of it. Families change tax preparers, the carryforward is not entered, and the credit quietly disappears. If either spouse paid AMT in a past year, keep the Form 8801 from that return with your permanent records. Our equity compensation and benefits work covers ISO exercise planning in more detail.

The foreign tax credit on a taxable brokerage account

International index funds pay foreign taxes on your behalf, and the amount appears on your Form 1099-DIV. You can take it as a credit rather than a deduction, and the credit is usually worth more. Under the Form 1116 instructions, a joint return with no more than $600 of creditable foreign taxes, all from passive income reported on a 1099, can claim the credit without filing Form 1116. Above $600 the credit is still available, it just takes the longer form. Many families with a large taxable account in addition to their 401(k)s leave this on the table each year. More on how those accounts are taxed: do you pay tax on a brokerage account if you don’t sell.

Credits that ended or are about to change

• Home energy credits. The energy efficient home improvement credit (section 25C) does not apply to property placed in service after December 31, 2025, and the residential clean energy credit for solar and batteries (section 25D) does not apply to expenditures made after that date (P.L. 119-21, sections 70505 and 70506). A 2025 installation belongs on your 2025 return.
• Clean vehicle credit. It ended for vehicles acquired after September 30, 2025 (section 70502).
• New scholarship credit. For tax years ending after December 31, 2026 (so from 2027 for most families), the law allows a federal credit of up to $1,700 for cash contributions to scholarship granting organizations for K-12 students, but only in states that elect to take part (section 70411). Check whether California or Washington has opted in before counting on it.

What to decide this year

1. At open enrollment, compare the dependent care FSA with the credit using your own numbers (for most two-earner households at this income the FSA is worth more), and confirm whether your employer adopted the $7,500 limit.
2. If either spouse changed employers this year, add up the Social Security tax withheld on that spouse’s W-2s and compare the total with the $11,439 cap.
3. If you ever paid AMT, confirm your preparer carried the Form 8801 credit forward.
4. Do not count on the Child Tax Credit. With two children it is zero once joint MAGI reaches $488,000 for 2026.

What to write down for your children

None of these credits is large. What your children can learn from them is the reasoning: why you chose the FSA over the credit, why you kept an old Form 8801, why you filed jointly. A one-paragraph note each year, kept with your tax records in a FamilyKnowledge® Library, shows them how a household makes small, repeatable decisions well. Conversations fade. Documentation compounds.

Common questions

Do married couples get a special tax credit just for being married?

No. There is no federal credit for being married. Marriage changes your brackets, standard deduction and phase-out thresholds. For high-income couples, it also means your credits are tested against combined income, which is why most family credits phase out. Filing jointly is still required for several credits, including the dependent care credit.

Can we get the Child Tax Credit if one spouse earns much less?

Not by filing separately to game the limit. On a separate return the phase-out starts at $200,000 instead of $400,000, and you lose the dependent care credit entirely. For most couples where one spouse has a high W-2 income, separate returns increase the total tax. Run both versions before deciding.

Next step

Pull your two most recent W-2s and last year’s return, and check the three items above: dependent care FSA election, Social Security withholding by employer and any Form 8801 carryforward. If you want a second set of eyes across tax, benefits and your children’s accounts, our tax management and family governance pages describe how Age Five Family Office™ families handle it, starting with a Tax & Wealth Assessment.

This is general education, and the right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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