Non-Refundable Tax Credit
Candlefocus EditorOne type of non-refundable tax credit is the foreign tax credit. This credit can be used to offset taxes that are owed to another country and are usually based on income or investments. This credit can be claimed for taxes paid in the current tax year or can be carried forward for up to 10 years in some cases.
The saver’s credit is another common non-refundable tax credit available in the United States. This credit is meant to encourage people to save for their retirement and is limited to a certain amount each year. Individuals who make contribution to a retirement fund such as an IRA, 401(k), or employer-sponsored plan may be able to qualify for this credit.
In addition to the foreign tax credit and the saver’s credit, there are many other non-refundable credits available under U.S. tax law. These include credits such as the dependent care credit, the earned income credit, and the child tax credit. Each of these credits works in a slightly different manner and must be carefully evaluated before claiming.
Non-refundable tax credits are just one way for individuals and businesses to reduce their overall taxes owed. Generally, these credits cannot lead to a refund, but can lower the amount of taxes owed in the current year. It is important to remember that different credits have different eligibility requirements, and so always check with a tax professional or the IRS to confirm one’s eligibility for a credit and the available amounts.