Using the CREDIT the fed/state tax liability will be reduced so you owe less in taxes. It is not just added to your refund. Here is a for instance...
Say you owe $26K of tax liability on the return and the $7500 credit is used to reduce that tax bill then you will owe $18500 in fed taxes. So far the math makes sense right ?
Now if your total withholding (1040 line 32) is $18500 then your bottom line on the return is zero ... no refund or balance due.
If your total withholdings are higher than $18500 you will have a refund of the excess withheld.
If your total withholdings are less than $18500 you will have a balance due on the return.
If you read/follow the form 1040 line by line you will see it is simply one long math problem.
