Comments on: What Are Refundable Tax Credits vs. Non-Refundable Tax Credits?

By: Joe

Joe — Mon, 11 Apr 2011 20:26:37 +0000

the Refundable American Opportunity Credit is one that the article left out. It’s for education expenses.

IRS form 8863

By: Donna

Donna — Wed, 02 Feb 2011 05:26:57 +0000

Also the Earned Income Tax Credit was implemented to offset the Social Security taxes that were taken out of your (my) paycheck. Now the one thing I don’t quite understand is if in taking that credit should I still get credit for that time as earned toward Social Security? I can see not but I believe it does still show up. In my case that really isn’t going to matter because I ended up getting married and quitting work so if I ever draw myself it will be on my husband’s income but I do wonder about that for those that don’t.

By: Donna

Donna — Wed, 02 Feb 2011 05:21:13 +0000

At least you have to actually work to get the Earned Income Tax Credit – hence it being called the “Earned” Income Tax Credit – I don’t quite consider that welfare.

I used this when I was a single mom and it helped me buy a house for us (back before there was all this other house buying credits). I thought welfare was for those who didn’t work.

By: Mat

Mat — Wed, 29 Jul 2009 23:43:09 +0000

Will you discuss non refundable tax credits too? I want to make sure I’m not missing out on anything

By: eric

eric — Wed, 29 Jul 2009 20:35:02 +0000

Oh refundable tax credit….how I love thee.

By: Posco

Posco — Tue, 28 Jul 2009 20:31:10 +0000

I was just going to say what Flach said above… EIC is basically a euphemism for welfare.

For some reason it seems less humiliating to receive EIC than it is to be participating in a welfare program.

And… I know how tempting it is to cook numbers to receive the EIC. A couple years ago I disqualified my family from EIC due to some stock transactions that made my investment income too high.

By: Robert D Flach

Robert D Flach — Tue, 28 Jul 2009 20:24:19 +0000

JW-

Refundable credits encourage tax fraud.

The Earned Income Tax Credit, because of its “refundable” nature, is probably the largest source of tax fraud. About 25% to 30% of all EITC claims are fraudulent.

Refundable credits, such as the EITC, are in reality welfare. If the government wants to provide welfare benefits to low income individuals and families, which is fine, it should do so separately and not use the tax return as the method of delivery.

Tax preparers have enough trouble with just getting the proper information from clients for legitimate tax items. They should not also be responsible for determining if a person is eligible for welfare.

TWTP

By: Kosmo @ The Casual Observer

Kosmo @ The Casual Observer — Tue, 28 Jul 2009 20:17:50 +0000

“I learned from that period was that an estimated 37.8% of tax filers in 2009 would pay zero or negative tax!”

I wonder how many of these people are students with minimal earnings? Certainly that doesn’t account for all of them, but it would be a chunk. A 15 year old kid with a paper route isn’t a drain on society simple because he doesn’t pay income tax.

By: Kosmo @ The Casual Observer

Kosmo @ The Casual Observer — Tue, 28 Jul 2009 20:16:03 +0000

Right.

I think multiple definitions of “refundable” might be causing confusion. This doesn’t mean “refundable” as in airline tickets that are refundable or non-refundable.

By: Chuck

Chuck — Tue, 28 Jul 2009 17:43:15 +0000

You would get the money.

By: Richard

Richard — Tue, 28 Jul 2009 17:29:21 +0000

Hmmm… good article! Question though… when you talk about owing, do you mean your liability for the year, or how much you still actually owe?

For example, what if after I do my taxes, my total tax liability is $1,500. But I’ve already paid exactly $1,500 in taxes straight from my salary. I recheck my 1040 and realize that I have a $500 non-refundable tax credit in there. So my total tax liability is actually $1,000. But I’ve already paid the Man $1,500. Do I get back the $500 in this case? Or is it that because I paid the $1,500, I can’t because that credit is “non-refundable”?