Business, Legal & Accounting Glossary
A non-refundable tax credit is a credit that can reduce the amount of an individual’s tax liability (i.e. the amount of income taxes owed) to zero but cannot exceed the total amount of income taxes owed. For example, if an individual has a non-refundable tax credit of $5,000 and a tax liability of $3,000, the IRS will not refund the remaining $2,000 of the non-refundable tax credit. The maximum non-refundable tax credit allowable in this example is equal to the individual’s tax liability of $3,000. Using a different example, if a non-refundable tax credit is $5,000 and the tax liability is $6,000, the individual can use the entire $5,000 of the non-refundable tax credit. This reduces the individual’s tax liability to $1,000. Examples of non-refundable tax credits include alternative motor vehicle credit, child tax credit, residential energy credit, child and dependent care credit, retirement savings contribution credit and foreign tax credit.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Non-Refundable Tax Credit are sourced/syndicated and enhanced from:
This glossary post was last updated: 7th February, 2020 | 0 Views.