IRS 1040 Schedule 3 “Nonrefundable Credits” Form Explained

Schedule 3 (Form 1040), Additional Credits and Payments, reports tax credits and payments that don’t have their own line on Form 1040. Part I covers nonrefundable credits, which can reduce your tax to zero but not below. Part II covers other payments and refundable credits.

Part I: Nonrefundable Credits

• Foreign tax credit for income tax paid to another country, often from mutual funds (Form 1116, or directly for small amounts)
• Child and dependent care credit (Form 2441): beginning in 2026, the credit can be up to 50% of up to $3,000 of expenses for one qualifying person or $6,000 for two or more, with the percentage reduced as income rises
• Education credits (Form 8863): the Lifetime Learning Credit and the nonrefundable part of the American Opportunity Credit. See Form 1098-T.
• Retirement savings contributions credit (Saver’s Credit) (Form 8880) for lower- and moderate-income savers
• Residential energy credits (Form 5695): the energy efficient home improvement credit and residential clean energy credit ended for property placed in service or installed after December 31, 2025, according to the IRS. Carryforwards of unused residential clean energy credit from earlier years may still be claimed.
• Other credits, such as the general business credit, the credit for the elderly or disabled (Schedule R), the adoption credit, and the credit for prior year minimum tax

The total from Part I carries to Form 1040. The child tax credit isn’t on Schedule 3. It’s claimed directly on Form 1040 with Schedule 8812.

Part II: Other Payments and Refundable Credits

• Net premium tax credit for marketplace health insurance (Form 8962)
• Amount paid with an extension request (Form 4868)
• Excess Social Security tax withheld when you had more than one employer and total wages were above the $184,500 wage base
• Credit for federal tax on fuels used for off-highway business or farming (Form 4136)
• Other refundable credits and deferrals

How It Fits With the Other Schedules

Schedule 1 covers additional income and adjustments, Schedule 2 covers additional taxes, and Schedule 3 covers additional credits and payments. Together they feed into Form 1040.

Tips

• Nonrefundable credits are applied in a set order, and some unused credits carry forward. Keep the worksheets.
• Electric vehicle credits also ended for vehicles acquired after September 30, 2025.
• Foreign tax shown on Form 1099-DIV is easy to miss, and claiming it is often worth more than a deduction.

Get Help From Diehl CPA

Tax rules change often, and the right answer depends on your full financial picture. Diehl CPA, led by Mark Diehl, CPA, CFE, prepares returns and builds tax plans for investors, retirees and closely held businesses. Learn about our tax return preparation and investment tax planning services, or contact us to talk through your situation.

This article is general information, not tax or legal advice for your specific situation. Updated October 2026.