Did you know that some credits are refundable, but others aren’t?

Since a tax credit provides a dollar-for-dollar reduction in what you owe, there are times when credit could reduce your taxes below $0. If you owed $1,000 in taxes, for example, and were eligible for $2,000 credit, technically your new tax bill would be -$1,000 and the government should cut you a check for $1,000.

However, it doesn’t always work that way. Some credits are fully or partially refundable, which means you “do” get back the money if the credit entitles you to more than the taxes you owe. Others are not refundable, so you can only reduce your taxes down to $0 but won’t get a check back in the mail for more than you paid in.

The Child Tax Credit is an example of a partially refundable credit. The credit is worth up to $2,000, $1,400 of which is refundable. If you owed $2,000 in taxes, your Child Tax Credit could reduce your tax bill to $0. If you owed nothing in taxes and claimed the Child Tax Credit, the maximum you’d be able to get back would be the $1,400 refundable portion of the credit.

Have any questions, give us a call here at Red Rock Tax & Consulting. We are here to help you get through the stress of taxes! We offer a free 30-minute consultation so call us and let’s get your appointment set up 435-635-2494

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