Refundable vs. Non-Refundable Income Tax Credits

[kelly_brooks]

Over the past week or so, I’ve heard from several readers who are somewhat confused about refundable vs. non-refundable tax credits and, ultimately, what it means to “pay taxes.” As a quick reminder, tax credits directly reduce your tax liability on a dollar-for-dollar basis. In contrast, tax deductions reduce your taxable income (and thus result in a fractional decrease of your tax liability).