i paid more taxes than i owe so i am getting a refund - is this bad idea because now i can take advantage of the nonrefundable tax credits?

Forum|Forum|3 years ago
April 10, 2023
1 reply
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I paid more taxes than i owe so i am getting a refund - is this a bad idea because now I can take advantage of the nonrefundable tax credits?

Best answer by CatinaT1

From your example above:

For example,

I had $4000 withheld from paycheck.
I owe $3000 in federal tax.
I qualify for $1000 nonrefundable tax credit.

$3,000 in Federal Tax

$1,000 non-refundable Credit

$2,000 in Federal Tax

$4,000 withheld

$2,000 refund

Don't apply any withholdings until after all credits.

JohnB5677

Level 15

No, a nonrefundable tax credit means you can get credit for the taxes that you owe, but you cannot reduce your taxes past zero.

If you had $1,000 withheld from your paycheck.
You owe $600 in federal income tax.
You will get a $400 refund simply because you had more withheld than you owe.
If you have a $700 nonrefundable credit it can reduce your taxes by the $600 that you owe in taxes, but no more.
In this case you would not be able to take advantage of the last $100.
The initial refund makes no difference.

You can preview your tax return by going to: Make note of line 24 - Total Tax

On the menu bar on the left that shows.
1. My Info
2. Federal
3. State
4. Review
5. File
Select Tax Tools
On the drop-down select Tools
On the popup menu
Select View Tax Summary
On the left sidebar
Select Preview my 1040.
Schedules 1,2&3 are included if you scroll down past your 1040.
To return to the entry screens press Back on the sidebar.

Some key numbers on your 1040 tax return are:

Line 15 - Taxable Income

Line 24 - Total Tax.

Line 25 - Withholdings.

Line 33 - Payments including Credits.

Line 34 - Overpayments.

Line 37 - Tax owed.

If I've misunderstood your question, and this does not completely answer it, please contact us again and provide some additional details.

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Seaduck79

Level 2

Interesting. My situation is that my tax bill was (let's say) $15k. I paid in $10k, leaving a liability of $5k.

I have a solar tax credit, of which I can apply $5k, bring my net tax bill to zero, correct?

If that is correct, why is TT Online telling me that I am getting a large (like $10k) refund?

Vanessa A

Level 15

We would need more information such as how much was your carry forward and the numbers that you have on lines 16 through 34.

It could be that you have other credits that are resulting in a refund. It could be that you have a typo or entered an amount withheld and something in estimated tax payments.

Your tax liability is the amount on line 18. It is the total amount of taxes you are responsible for without consideration of what you have already paid in. What you pay in, is just a payment towards your liability. So, if you have a liability of $10,000 and you pay in $5,000, but you have total nonrefundable credits of $10,000, you would get your $5,000 back that you paid in because the credits would bring your liability down to $0.

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