Non-Refundable Tax Credit

Loading the player...

DEFINITION of 'Non-Refundable Tax Credit'

A tax credit that can't reduce the amount of tax owed to less than zero. If the credit were able to reduce the amount of tax owed to less than zero, the taxpayer would be entitled to a payment from the government.

Also referred to as a "wastable tax credit."

BREAKING DOWN 'Non-Refundable Tax Credit'

A tax credit is applied to the amount of tax owed by the taxpayer after all deductions are made from his or her taxable income. For example, before credits, if the tax owed to the IRS is $500 and the taxpayer has a tax credit of $200, the total amount owed is $300. If the taxpayer has total non-refundable credits of $600, his or her tax bill will be $0 ($500 tax bill - $600 in non-refundable tax credits). An example of a non-refundable tax credit is the saver's tax credit, which is available to taxpayers who make contributions to retirement savings plans.

RELATED TERMS
  1. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  2. Additional Child Tax Credit

    A refundable credit that can be claimed by taxpayers who are ...
  3. Tax Break

    A tax break is a savings on a taxpayer's liability. A tax break ...
  4. Total Tax

    The composite total of all taxes that is owed by a taxpayer for ...
  5. Child Tax Credit

    A credit given to taxpayers for each dependent child that is ...
  6. Refundable Credit

    A tax credit that is not limited by the amount of an individual's ...
Related Articles
  1. Personal Finance

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  2. Personal Finance

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  3. Personal Finance

    5 Tax Credits You Shouldn't Miss

    If you're not taking advantage of these deductions, you could be missing out on tax savings.
  4. Retirement

    Saver's Tax Credit: A Retirement Savings Incentive

    Here's another reason to put money toward your retirement nest egg.
  5. Personal Finance

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  6. Personal Finance

    Tax Credits That Can Get You a Refund

    Here are a few of the credits that may result in a refund check, even if you owe no taxes this year.
  7. Financial Advisor

    Federal Tax Brackets

    Why do we have income tax brackets? What do they do for us? Read this to understand the basics and where to find your own bracket.
  8. Personal Finance

    Top Tax Refunds For Recent Grads

    Don't miss out on these tax credits if you have recently graduated.
  9. Personal Finance

    How To Get The Most Money Back On Your Tax Return

    Many people pay more taxes than they have to simply because they don’t know better. Here are a few suggestions for getting the most out of your tax return.
  10. Managing Wealth

    Investment Tax Basics For All Investors

    Nothing can be said to be certain, except death and taxes even in your investments.
RELATED FAQS
  1. What is the difference between a write-off and a deduction?

    Understand the differences between a tax write-off and a tax deduction. Learn how each one works to reduce income taxes and ... Read Answer >>
  2. How do I sign up for the saver's tax credit?

    The saver's tax credit is a non-refundable tax credit available to eligible taxpayers in the U.S. who make contributions ... Read Answer >>
  3. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
  4. Do I need to file an income tax return every year?

    Understand if a person needs to file a tax return every year. Learn the benefits of filing a yearly income tax return even ... Read Answer >>
  5. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  6. Is the marginal tax rate a progressive tax?

    Learn how the marginal tax rate is a progressive tax that takes a higher percentage of income tax from high-income earners ... Read Answer >>
Trading Center