Understanding Tax Credits: How They Impact Your Tax Liability

Not all tax credits work the same way! Knowing the difference between nonrefundable, refundable, and partially refundable tax credits can help you maximize your tax savings.

1. Nonrefundable Tax Credits

✅ Reduce the amount of tax you owe
❌ Do NOT increase your tax refund or create one if you don’t already qualify
Example: Child and Dependent Care Credit

2. Refundable Tax Credits

✅ Reduce your tax liability AND can result in a tax refund if the credit exceeds what you owe
💰 You get the remaining amount as a refund!
Example: Earned Income Tax Credit (EITC)

3. Partially Refundable Tax Credits

✅ Reduce the amount of tax you owe
💰 You may receive a partial refund if the credit exceeds your tax liability
Example: American Opportunity Tax Credit (AOTC)

Understanding how these credits apply to you can help you keep more of your money! Need help navigating tax credits? ThoroAccount is here to make sure you get every credit you qualify for. Contact us today!