Heat 2 tablespoons of butter over medium heat in a large pot. Once melted, add the diced onions and jalapeno peppers. Sauté them for about 5–6 minutes until they’re soft and fragrant. Then, stir in the minced garlic and cook for an additional minute.
Add all remaining ingredients EXCEPT for the cheddar cheese, cream cheese, and any garnish items. Start with just two tablespoons of taco seasoning; you can adjust later based on your taste preferences.
Allow the soup to come to a gentle bubble while partially covering it. It’s important not to boil too aggressively.
After about 20–25 minutes, check that your chicken is cooked through—remove it from the pot. Using two forks, shred the chicken into bite-sized pieces before returning it to the pot.
Reduce heat to low before gradually adding in both the shredded cheddar cheese and softened cream cheese. Stir continuously until everything is smooth and creamy.
Taste your soup and adjust seasonings if necessary; garnish as desired before serving warm.