What is the difference between a non-refundable and refundable credit?
A non-refundable credit can reduce a taxpayer’s tax liability to zero, but does not refund to the taxpayer any unused portion of the credit. The non-refundable credits are listed under Tax and Credits on the tax return form. For example, Taxpayer A owes $600 in taxes for 2007, but the taxpayer has a $1,000 non-refundable education credit. Taxpayer A’s tax liability is reduced from $600 to $0. The remaining $400 credit is not used and simply disappears. (The Adoption Credit has unique rules allowing unused credit amounts to be used in future years. This is an exception and not the general rule.) A refundable credit can reduce a taxpayer’s tax liability to zero, and refunds the remaining credit amount to the taxpayer. This unused credit can give back to the taxpayer more money than the taxpayer paid in taxes for the year. Refundable credits are listed as Payments on the tax return form. For example, Taxpayer B owes $100 in taxes for 2007 but is eligible for a $400 Additional Child Tax Cr
