Is That Credit Refundable?

refundable tax credit

There are two different types of tax credits: refundable and non-refundable. In general, most tax aren’t refundable, but there are a few that can add a little extra cash back into your pocket at tax time. There’s a significant difference between the two types, so it’s important to know which category your credit falls into. The Child Tax Credit is a popular credit among parent taxpayers. If you have children, you may be eligible to claim $1,000 per on your tax return.

Non- reduce the amount of owed to the IRS, and can erase your owed taxes entirely in some cases. So, if you have a tax liability of $1,000 and are eligible to claim a non-refundable worth $2,000, you’ll reduce your to zero, however the keeps any remaining balance. You won’t receive any money back, and aren’t able to carry it forward to another tax year.

Refundable tax work a little differently. In the previous scenario, if the was refundable, your tax debt would still be reduced to zero, though the remaining balance of $1,000 would be refunded to you. These tax credits help to eliminate your and have an actual refunded amount of the balance on the credit.