Heat your butter over medium heat in your soup pot and add the diced onions and jalapeño. Sauté for 5-6 minutes, then add the garlic and cook for 1 more minute.
Add all remaining ingredients EXCEPT for the cheddar cheese, cream cheese, and garnish ingredients. Start with 2 Tbsp of your taco seasoning and adjust to your taste. Also, the hot sauce and cayenne are optional, so make it like you like it.
Let the soup gradually come to a gentle bubble, partially covered. If you boil the chicken hard, it becomes tough. Cooking it slowly keeps it nice and juicy.
Remove the chicken after 20-25 minutes, once it is almost cooked through (120℉) Timing depends on the thickness of the chicken. Use 2 forks or some meat claws to shred, then return to the soup.
Reduce heat to low and gradually sprinkle in the shredded cheese and softened cream cheese. Stir until smooth and creamy.
Taste and adjust your seasonings as needed. Garnish and serve!