Non-refundable tax credits are a type of credit that can be used to reduce the amount of taxes owed, but cannot be used to increase a tax refund or create a refund when one has not yet been received. This is because the savings from the credit cannot exceed the amount of taxes owed. However, if there is no taxable income due to the credits and taxes were withheld from payroll on a monthly basis, some or all of the amount may be refunded. In order to qualify for certain non-refundable credits, such as the Child Tax Credit and Additional Child Tax Credit, the child must have lived with the taxpayer for at least half of the year and received at least half of their support from them.
The U. S. Opportunity Tax Credit (AOTC) is a partially refundable credit that can help cover the costs of the first four years of higher education. The Child and Dependent Care Credit (CDCTC) is another non-refundable credit that can be used by working taxpayers who pay for the care of a child under 13 or another dependent.
The Residential Energy Credit provides tax credits based on a percentage of the costs of energy-saving home improvements. It is important to note that some non-refundable tax credits, such as the General Business Credit (GBC) and Foreign Tax Credit (FTC), can be transferred to a previous year and carried over to future tax years. This means that if they are not used in one year, they can be used in another. When it comes to understanding how much tax must be paid to the government, everyone's circumstances are different. It is important to speak with a tax professional to get accurate information about one's personal situation and credit applications.