Non-refundable credits can reduce your income tax liability (the amount of income tax you must pay for the year); however, it can only reduce your income tax liability to zero $0. In other words, if you have an income tax liability of $2,254, then the most non-refundable credit you can get is $2,254. You could get less or no credit, but you can't get more.
Examples of Non-Refundable Credits:
Refundable credits are credits that are considered as payments you made--think of them as free money. if you take your total tax liability and subtract ALL the payments you made (Federal tax you had withheld plus the non-refundable credits) anything that is left over is refunded to you!
Examples of refundable credits:
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Please note: I, Mary Meador, AM NOT a certified accountant or tax law expert. I volunteer with VITA providing free tax preparation for individuals and families whose income is less than $66,000 a year. We deal with simple returns at our sites. I cannot guarantee the accuracy of all the information on this site as tax laws change and I may not have a clear understanding of complicated issues. I am trying to provide basic tax preparation information for our volunteers to get started--remember Publication 4012 is your go-to resource for questions, as well as irs.gov and Publication 17. I hope you find this information useful and easy to understand. Thanks for being a VITA/TCE volunteer!
**I am human, so if you find a mistake, please let me know so I can fix it--we are all in this together**
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