What If Your Tax Credits Total More Than The Taxes You Paid Out?

Fri, Jan 29, 2010

Tax Q&A

My husband and I are getting big credits this year. Do you get this money if you don’t owe anything on your taxes?

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4 Responses to “What If Your Tax Credits Total More Than The Taxes You Paid Out?”

Bob F Says:
29. January 2010 at 10:50 pm

It depends on the credit. Take a look at the back side of Form 1040. http://www.irs.gov/pub/irs-pdf/f1040.pdf
The credits near the top (lines 47-55) are called non-refundable credit. If you have more of those than your tax bill, they won’t help – they can only reduce you to zero.
If you have credits in the lower middle (lines 66-71), they are called refundable credits because they can be refunded to you even after your tax bill get to 0.
And don’t worry if your credits fall into the first category so you think you won’t get full benefit. Some of the non-refundable credit carry forward into future years. The adoption credit is a good example. It is frequently so big that people don’t benefit from it all in the first year, but it can be carried forward for as many as five years into the future to help with future tax bills.

angela Says:
29. January 2010 at 10:50 pm

It depends on what tax credits you are talking about. The tax credits listed in the top section of the back of the 1040 (like the child tax credit) can only equal the amount of tax you owe. The credits down lower on that page, like the earned income credit and the additional child tax credit can be received as a refund. You’ll have to read the instructions on the credits you are taking to see if they can be given as a refund or if they can only equal the amount of tax you owe. You can look things up at http://www.irs.gov.

anthony w Says:
29. January 2010 at 10:50 pm

some tax credits like the earned income credit will get you money back, however most just offset the tax you owe, also you will probably get back all that you have paid in

Wayne Z Says:
29. January 2010 at 10:50 pm

Which Credits?
Certain credits can reduce your tax liability to zero but can not by themselves create a refund.

Bob F Says:
29. January 2010 at 10:50 pm
It depends on the credit. Take a look at the back side of Form 1040. http://www.irs.gov/pub/irs-pdf/f1040.pdf
The credits near the top (lines 47-55) are called non-refundable credit. If you have more of those than your tax bill, they won’t help – they can only reduce you to zero.
If you have credits in the lower middle (lines 66-71), they are called refundable credits because they can be refunded to you even after your tax bill get to 0.
And don’t worry if your credits fall into the first category so you think you won’t get full benefit. Some of the non-refundable credit carry forward into future years. The adoption credit is a good example. It is frequently so big that people don’t benefit from it all in the first year, but it can be carried forward for as many as five years into the future to help with future tax bills.
angela Says:
29. January 2010 at 10:50 pm
It depends on what tax credits you are talking about. The tax credits listed in the top section of the back of the 1040 (like the child tax credit) can only equal the amount of tax you owe. The credits down lower on that page, like the earned income credit and the additional child tax credit can be received as a refund. You’ll have to read the instructions on the credits you are taking to see if they can be given as a refund or if they can only equal the amount of tax you owe. You can look things up at http://www.irs.gov.
anthony w Says:
29. January 2010 at 10:50 pm
some tax credits like the earned income credit will get you money back, however most just offset the tax you owe, also you will probably get back all that you have paid in
Wayne Z Says:
29. January 2010 at 10:50 pm
Which Credits?
Certain credits can reduce your tax liability to zero but can not by themselves create a refund.

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