What Does Non-Refundable Tax Credits Exceeding Your Tax Payable Mean?

Taxpayers subtract refundable and non-refundable credits from the taxes they owe. If a refundable credit is greater than the amount of taxes due, the difference is paid as a refund. On the other hand, if a non-refundable credit exceeds the amount of taxes due, the excess is lost. Non-refundable credits are used to reduce your tax liability.

This is determined by your adjusted gross income (AGI) and the tax categories applied, minus the total of the non-refundable tax credits. These credits can reduce your tax liability to zero, but they will never result in a refund. An example of this type of credit is the Iowa child and dependent care credit or any other credit included in step 10 of the IA 1040 individual income tax form. A credit transfer, also known as a transfer, allows you to apply the remaining amount of a previous year's tax credit to a current-year tax return. Refundable credits are more beneficial than non-refundable credits since they can lower your tax bill or give you a bigger refund.

Learn more about child tax credits and tax credits for parents with dependents and children. They can request that the credit be paid in advance to their insurance company to reduce their monthly premium payments or request all the credit on their tax return. This tax credit allows up to 40 percent of the credit as a tax payment if you qualify to apply for this credit for education expenses. Some of the most common types of non-refundable tax credits include the foreign tax credit (FTC) and the general trade credit (GBC). Each credit offers special benefits to students, but both credits cannot be claimed by or for the same student in the same year. Basically, a non-refundable credit means that it cannot be used to increase your tax refund or to create a refund when you haven't yet received it.

If your tax liability at the time the non-refundable tax credits are applied is zero, you will not benefit from them at all. Tax credits help you conserve larger portions of an apple; the more tax credits you apply for, the more hard-earned money you can keep, reduce taxes due or increase your tax refund.