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Tag Archive for Nonrefundable Tax Credits

Nonrefundable Tax Credits vs. Refundable Tax Credits

A nonrefundable tax credit is a credit that can reduce the amount of an individual’s tax liability to zero, but cannot exceed the total amount of income taxes owed. In other words, you would not receive a tax refund if the credit exceeds the amount of your tax liability. For example, if you have a nonrefundable tax credit of $5,000 and a tax liability of $3,000, the credit will eliminate the tax liability, that is, reduce it to zero. The remaining $2,000 of the credit, however, will be lost, because the IRS will not send you a refund for this amount.

Nonrefundable credits for tax year 2014 include the following:

• Credit for child and dependent care expenses.
• Child tax credit. Read more