A tax credit is a direct reduction in the taxpayer’s tax liability (as opposed to a deduction which only lowers the taxable income upon which the tax liability is computed).  Each tax credit has its own unique set of requirements and qualifications. 

 

Some of the credits are refundable and some are non-refundable.  A refundable credit can increase the refund paid to the taxpayer.  A non-refundable credit is limited to lowering the computed tax liability (all the way to zero) but cannot increase the amount of the refund paid to the taxpayer.

 

These are some of the tax credits available based on different circumstances and situations:

 

• Child Tax Credit (non-refundable)

• Additional Child Tax Credit (refundable)

• Child and Dependent Care Credit (non-refundable)

• American Opportunity Education Credit (partially refundable)

• Lifetime Learning Credit (non-refundable)

• Solar Energy Credit (non-refundable)

• Earned Income Tax Credit (refundable)