Your Ask Joey ™ Answer

What is a refundable tax credit?

A refundable tax credit is one of the two types of personal tax credits that individual taxpayers can qualify for. A refundable tax credit means that a taxpayer can get a refund, even if it is more than the taxpayers tax liability. As you can see in the example below, the taxpayers tax liability is $100, but a refundable tax credit of $150 would result in a tax refund of $50.

A nonrefundable tax credit is different because the taxpayer only receives credit up to the amount of tax that they owe. In the example above, even though the taxpayer has tax credits of $150, they can only take $100 worth of credits because their tax liability is $100. Therefore, they would not have a refund or any taxes due.

Below is a list of common refundable and nonrefundable personal tax credits:


Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner