Refundable Credit

Refundable Credit

Refundable Credit means:
a credit or other debt instrument that is paid to a taxpayer even if the amount of the credit exceeds the tax liability (e.g., the earned income tax credit and taxes withheld on wages).

A credit that is allowed even if a taxpayer does not owe any taxes nor has any income taxes withheld from his or her pay. Examples of refundable credits are the Earned Income Credit (EIC) and the Circuit Breaker Credit. tax = $450; credit calculated = $750. The credit can reduce the tax of $450 to $0 and the difference of ($300) will be refunded to the taxpayer.

When the amount of a credit is greater than the tax owed, taxpayers can receive a “refund” for some of the unused credit.

See also the entries Income Tax and State Income Tax in the American Encyclopedia of Law.

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