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The list of refundable and non refundable tax credits: the maximum the IRS can return to you

The IRS will be returning money to taxpayers this tax season but the amount will depend on a number of different credits.

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US families are looking at the possible credits they can use to deduct them from the taxes they have to pay this season. For some of these cases, the US Treasury may even return money to households.

There are different types of credits, which are structured in what are known as refundable and non-refundable rates. In this case, it should be mentioned that there may be a series of hybrid models that can be paid partly by the taxpayer and partly by the state to the families.

What are the differences between refundable or non-refundable fees?

A tax credit is essentially a reduction or a rebate for taxes paid to the IRS. Tax credits in general can be split into two types: refundable and non-refundable.

A refundable tax credit is available to eligible claimants no matter how much tax they have owed. However a non-refundable tax credit is capped at the amount of tax that the claimant has paid; if you only pay $1,000 in income tax then you would be unable to receive more than $1,000 in the form of a non-refundable tax credit.

Which credits are refundable and which are non-refundable?

After defining these two tax plans, which are highly relevant during tax season, it is worth highlighting which types of rates are refundable and non-refundable. In the case of the former, the following are refundable:

  • Earned Income Tax Credit (EITC): In this case, if you have three or more children you can receive a maximum amount of $6,728.
  • Child Tax Credit (CTC): In that circumstance, in 2021 it was fully refundable, and depends on the age of the offspring. If you had children between the ages of six and 17, you can get a benefit of up to $3,000. In the case of offspring under six, the units increase to $3,600.

On the other hand, it is worth noting the existence of non-refundable rates, where no benefits are obtained:

  • American opportunity tax credit: This is a hybrid situation; as one part is refunded and one part is not. Regarding this rate, it should be noted that the initial 40% is refundable. Meanwhile, the remaining 60% cannot be paid to the taxpayer.
  • Health insurance premium tax credit: In this type of rate, it is worth mentioning that, in some instances, it can indeed become a refundable credit. In the event that, during the year, the Government does not pay the insurer for the corresponding medical assistance, the citizen could receive an insurance premium rate as refundable.
  • Credit for child and dependent care expenses: Only in 2021, it was refundable, but usually it is not. This is a most particular case, since it is not fully refundable. In this situation, only some people, whose income is low, will have access to it. In their situation, the maximum to which they can aspire is $1,500. It should be noted, however, that those who are obliged to file a tax return are eligible for a maximum of $2,000.