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Lesson 13

Credits Part 1

Non-Refundable

& Refundable

Section G, I, J

VITA/TCE

TRAINING 101

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The Differences Between:

​

Non-refundable credits

&

Refundable credits

(and proposed changes to refundable credits)

You are not expected to memorize any of this– just be familiar with it.

And how to use your PUB 4012

In this presentation we will cover:

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Type of Non-refundable Credits

  • Child Tax Credit  (CTC)
  • Credit for Other Dependents,
  • Child & Dependent Care Credit  (aka Daycare Credit)
  • Education Credit (Lifetime and part of American Opportunity)
  • Retirement Savings Credit
  • Credit for Elderly & Disabled
  • Foreign Tax Credit

and more

​

You are not expected to memorize any of this– just be familiar with it.

And how to use your PUB 4012

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They actually received $2,000 in Non-Refundable Credits.

​

Non-Refundable Tax Credits

Total Income Tax + Marketplace Repayment

In this example:

The most this Taxpayer could get in Non-Refundable Credits is $5,209. (Line 18)

Non-Refundable credits can only reduce income tax (Line 18) to zero.

System calculates the

credits automatically.

This is an image of a 2025 tax return

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Non-refundable Credit Limit Examples

Income Tax Liability

Total possible credit allowed $1,844;

Received $1,000

Income Tax Liability

Total possible credit allowed—none

Received no credit

Income Tax Liability

Total possible credit allowed $3,679

Received no credit

These are images from a 2025 tax return

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Type of Refundable Credits

  • Earned Income Tax Credit (EITC)
  • Additional Child Tax Credit (ACTC)
  • American Opportunity Education Credit (AOTC)
  • Net Premium Tax Credit - Marketplace

​

You are not expected to memorize any of this– just be familiar with it.

And how to use your PUB 4012

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Total Non-Refundable Credits received is $2,000- cannot be more than $5,209

Refundable Tax Credits

Total Income Tax + Marketplace Repayment

Non-Refundable credit can reduce tax liability to zero, but no refund beyond that.

Refundable Tax Credits can give a taxpayer money back, even if they don’t owe any taxes. If the credit is more than the tax owed, the extra amount is refunded.

Refundable Credits

​

System calculates the

credits automatically.

This is an image of a 2025 tax return

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Refundable Credit Examples-NO LIMIT!

Total Tax for the Year $1,413

Total refundable credit received $632

This is an image of a 2025 tax return

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Refundable Credit Examples-NO LIMIT!

Total Tax for the Year $1,413

Total refundable credit received $2,427

This is an image of a 2025 tax return

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Refundable Credits

You are not expected to memorize any of this– just be familiar with it.

And how to use your PUB 4012

Are the best, because whatever isn't used to pay a tax liability,

gets refunded to the Taxpayer!​ 

�​The refundable Credits are powerful, and very valuable to the taxpayer.

  • Often filed for fraudulently
  • IRS does look at returns with these credits a little more closely.
  • Errors & Fraud can result in hefty fines/penalties & interest

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Proposed Federal Public Benefit Regulations - Schedule 3-A

This is still a proposed change- not definitive yet.

If this passes- guidance will be provided

Treasury and the IRS have proposed treating the refundable portion of certain tax credits as a Federal Public Benefit.

The proposal may impact:

    • Earned Income Credit (EIC)
    • Additional Child Tax Credit (ACTC)
    • Refundable American Opportunity Credit
    • Refundable Adoption Credit

​

If these credits become classified as "Federal Public Benefits"

    • The proposal would create an additional eligibility requirement
    • The draft Schedule 3-A indicates taxpayers may need to certify citizenship, nationality, or qualified alien status in order to receive the refundable credits.

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WOO-HOO!!!

You Did it!

Next Up: Credits Part 2

Child Tax Credit

Additional Child Tax Credit

& Credit for Other Dependent