Refundable Credit

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Refundable Credit

A direct, dollar-for-dollar reduction of one's tax liability in which one still receives a tax refund even if one's liability drops below zero. That is, if a taxpayer otherwise owes $2,000 to the government, but takes $3,000 in refundable credits, then the government owes $1,000 to the taxpayer. Relatively few tax credits are refundable; most are limited to the amount of one's tax liability. However, the earned income tax credit is a common example of a refundable credit.

Refundable Credit

A credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability.
References in periodicals archive ?
As these refundable credits are a rich target for individuals attempting to file fraudulent returns, this mandatory delay gives the IRS more time to evaluate taxpayers' eligibility for the credit(s) before issuing the refund.
Unscrupulous return preparers and people do this to secure larger refundable credits such as the Earned Income Tax Credit and it can have serious repercussions.
which take the form of refundable credits that often generate
These refundable credits could help even more people if policymakers strengthened the EITC for workers not raising children in the home and extended the CTC to the poorest families, especially those with young children.
The credit is limited to the difference between the taxpayer's regular tax liability (reduced by the sum of all personal and business-related income tax credits except refundable credits) and the tentative minimum tax-with exceptions for certain tax years when part of the MTC was refundable to some taxpayers.
(81) With refundable credits on the other hand, a taxpayer can receive a refund of any remaining tax credit once the taxpayer's liability is reduced to zero dollars.
Transferable tax credits may be converted to cash faster than refundable credits, but will always yield less than 100% of the credit amount.
(9) Refundable credits also allow very precise targeting of benefits using family net income as the indicator of family need.
Saskatchewan, Ontario and Quebec have chosen to offer single, refundable credits, although at very different rates, which cover most children's activities.
While Utah has shown that it's serious about attracting R&D investments from well-established and profitable companies, refundable credits offer the most enticing and immediate rewards for startup and pre-revenue companies that are making significant investments in R&D.
Upon review, the federal and provincial governments will assess refundable credits in excess of 40 cents for every dollar spent in R&D.
Refundable credits are recoverable regardless of the amount of the taxpayer's tax liability for the taxable year.