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IRS: What are refundable tax credits and how do they work?

Millions of Americans have found ways to collect a larger refund or lower their tax bill to the IRS, often by using tax credits.

tax return forms where Americans can claim refundable tax credits from the IRS each year

In order to get money back or lower your bill, you must be using refundable tax credits.

Refundable credits will give you a refund even when you do not owe any money in taxes.

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Refundable tax credit from the IRS explained

Those who qualify for a credit that is refundable can see a refund in some cases.

This happens when the amount of the credit is larger than the taxes you owe.

If you have a tax bill of $800 but receive a credit worth $1,000, you’ll see a $200 refund.

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Receiving a refundable tax credit

There are qualifications for which credits you can from the IRS get based on different factors.

Factors include family size, income, and if you have earned income.

Lower income taxpayers will see more refundable credits that higher income taxpayers, but that doesn’t mean they’re out of reach.

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