Tax Credits: Refundable versus Non-Refundable

Can a tax credit from the IRS result in a tax refund?

In short, it depends on the type of credit it is. If the tax credit is a refundable credit, you would receive a tax refund if the credit exceeds the amount of your tax liability. If the credit is not refundable, you would not be able to reduce their tax liability below zero (even if the amount of the credit exceeds your tax liability).

Keep in mind that a tax credit is different from a tax deduction. A tax credit reduces your tax liability dollar for dollar whereas a tax deduction reduces the amount of your taxable income which is used to calculate your tax liability.

Here are some common refundable and non-refundable tax credits:

Refundable Tax Credits
Earned Income Tax Credit
Credit for Estimate Tax Payments
Credit for Excess Social Security Taxes Withheld
Credit for Taxes Withheld from Salaries and Wages
First-Time Homebuyer Credit
Making Work Pay Tax Credit
Health Coverage Tax Credit
Additional Child Tax Credit (partially refundable)
Alternative Minimum Tax (AMT) Credit (partially refundable)

Non-Refundable Tax Credits
Adoption Expense Tax Credit
Child and Dependent Care Tax Credit
Credit for the Elderly and Disabled
Credit for Qualified Alternative Fuel Vehicles
Hybrid Vehicle Credit
Tax credits for energy-saving home improvements
Hope Scholarship Tax Credit (American Opportunity Credit)
Lifetime Learning Tax Credit
Retirement Saver’s Tax Credit
Foreign Tax Credit
Child Tax Credit (generally not refundable)