Drake Tax - Refundable vs. Nonrefundable Credits

Nonrefundable

Nonrefundable credits can only take the tax liability to zero (so that the taxpayer does not owe any tax). They do not create a refund.

• Child and Dependent Care Credit (Form 2441) (For tax year 2021, this credit is refundable in certain cases.)

• Child Tax Credit

  • For most tax years, this credit is nonrefundable; this credit is refundable in 2021.

• Other Dependent Credit (Wks 8812)

• Credit for the Elderly or Disabled (Schedule R)

• District of Columbia First-Time Home-buyer Credit (Form 8859)

• Education Credits (Form 8863)

• Foreign Tax Credit (Form 1116)

• General Business Credit (Form 3800)

• Minimum Tax Credit (Form 8801)

• Mortgage Interest Credit (Form 8396)

• Residential Energy Credits (Form 5695)

• Retirement Savings Contribution Credit (Form 8880)

• Drake Tax - 8839: Adoption Credit

Refundable

Refundable credits can actually produce a refund for the taxpayer, even if the taxpayer does not have a tax liability (owe any taxes).

• American Opportunity Credit (Form 8863, 40% is refundable)

• Child Tax Credit (tax year 2021 only)

• Additional Child Tax Credit

  • Drake Tax 2020 and prior this produces Schedule 8812, in Drake Tax 2021, this is shown on Schedule 8812, page 2.

• Credit for Federal Tax Paid on Fuels (Form 4136)

• Net Premium Tax Credit (Form 8962)

• Earned Income Tax Credit (EIC)

• Health Coverage Tax Credit (Form 8885)

• Notice to Shareholder of Undistributed LT Capital Gains (Form 2439)