Non-refundable Tax Credits

What Are Non-refundable Tax Credits?

Non-refundable Tax Credits are basically tax credits that can only reduce a taxpayer’s liability. Any remaining amount from the credit is automatically forfeited by the taxpayer. These credits are also referred to as a “wasteable” tax credit, unlike refundable tax credits, which you can read more about here – Understanding Refundable Tax Credits.

How Do Non-refundable Tax Credits Work?

The IRS provides certain tax breaks in the form of tax credits that reduce a taxpayer’s liability, and ultimately what a taxpayer owes on their tax bill. A tax credit is applied to the amount of tax owed by a taxpayer once all deductions (link to tax deductions article) are made from their taxable income, reducing the total tax bill of an individual dollar for dollar. For example, say a taxpayer owes $3,000 on their tax bill but applies a $3,400 tax credit to their balance. This credit will reduce the bill down to zero, but the taxpayer will not receive the remaining $400 once the credit is applied.

Important Things to Note About Non-refundable Credits:

Non-refundable tax credits should be used first to minimize the taxes owed. Only after utilizing any non-refundable credits should the refundable tax credits be applied to reduce the minimized amount even further so that in the case that it falls below zero, if the tax liability becomes negative, the individual will receive a refund check for the total amount below zero.

With that, if a taxpayer files their taxes in the reverse order, they will use all of their refundable credit and the non-refundable credit will only reduce their tax bill to zero—nothing less.

Another important thing to note about non-refundable tax credits is that they are only valid in the year of reporting and expire once a return is filed. They may not be carried over into future years.

If you have any questions or concerns about non-refundable tax credits, CKH Group is here to help you! You can reach out here to book a free consultation or you can call us at 1-770-495-9077 or email us at

The above article only intends to provide general financial information and is based on open-source facts, it is not designed to provide specific advice or recommendations for any individual. It does not give personalized tax, financial, or other business and professional advice. Before taking any form of action, you should consult a financial professional who understands your particular situation. CKH Group will not be held liable for any harm/errors/claims arising from the articles. Whilst every effort has been taken to ensure the accuracy of the contents, we will not be held accountable for any changes that are beyond our control.

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