5. How Refunds Work: Nonrefundable vs. Refundable Portions
Understanding how refunds work is essential. The Child Tax Credit has both nonrefundable and refundable parts. This impacts how much you receive back on your taxes.
The nonrefundable portion reduces your tax liability. However, it does not lead to a refund if you owe no taxes. Conversely, the refundable portion, which includes the Additional Child Tax Credit, can offer a refund even when your tax obligation is zero.
Key points to remember:
- Nonrefundable: reduces taxes owed
- Refundable: can generate a refund
- Includes Additional Child Tax Credit