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Why is the IRS 503 saying the child and dependent credit is nonrefundable but my refund increased?

I purchased turbo tax and am trying to complete my taxes. According to the IRS publication 503 the child and dependent credit is non-refundable, but when I put the amount in, my refund increased. How do I get help to answer my question?

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2 Replies
KrisD15
Expert Alumni

Why is the IRS 503 saying the child and dependent credit is nonrefundable but my refund increased?

The Child and Dependent Credit is non-refundable. 

That is true. 

However it does lower your tax liability. 

If your tax liability is lowered by this non-refundable credit, and refundable credits follow, your refund increases. 

 

Example-

You have a $100 tax liability and a $500 Earned Income Credit, your refund would be $400.

 

Lets say you get a 200 Child and Dependent Care Credit (which is non-refundable so only 100 counts) and your tax liability goes down to zero. Next the 500 EIC kicks in, your refund is increased to $500. 

 

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rjs
Level 15
Level 15

Why is the IRS 503 saying the child and dependent credit is nonrefundable but my refund increased?

You may be misunderstanding the meaning of "nonrefundable." If a credit is nonrefundable, it means that it cannot reduce your tax to less than zero. In other words, it cannot make you get a refund of more than the tax you paid during the year through withholding and estimated tax payments. But if your total tax is more than zero before the credit is applied, the credit can reduce your tax. If your tax is lower, your refund increases.

 

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