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QuickBooks Blog -
By Charlie Russell
Calculators
New York Accountant - Macanta
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Tax Credits -
Definitions |
A tax
credit reduces the amount of tax for which you are liable.
Unlike a deduction, which reduces the amount of income
subject to tax, a tax credit directly reduces your
tax liability.
A tax credit is usually more valuable than a tax deduction
of the same dollar amount. There are two categories of tax
credits:
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Refundable credits
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Non-refundable credits
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Non-Refundable
Tax Credits
Most, but not all, tax credits are
referred to as non-refundable credits. A non-refundable
credit is a tax credit that can reduce your tax liability to
zero (0), but not below. You must have tax
liability on line 46 of Form 1040, line 18 of Form 1040A, or
line 43 of Form 1040NR to claim a non-refundable tax credit.
Non-refundable tax credits include:
Refundable Tax
Credits
A refundable tax credit is a tax
credit that can reduce your tax liability below zero (0).
Because it is possible to receive a refund based on these
types of credits, the credits are referred to as
refundable.
Refundable tax credits include:
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