1.2- What is a Refundable Tax Credit?

An Example of a refundable Tax credit is the Earned Income Tax credit. Tax credits can be refundable, non refundable and partially refundable. The maximum value of a nonrefundable tax credit is capped at a taxpayer's tax liability, however the refundable Tax credit is refunded to the taxpayer regardless of the amount of Tax liability. Example, if theTax payers annual Tax Liability is a $1000.00, and the refundable Tax mount is $1500.00, the difference of $500.00 is paid back to the Tax payer.