Understanding Non-Refundable Tax Credits and Their Impact on Tax Refunds

[shubham-123]

What exactly does non-refundable tax credit mean? If I owe $500 in taxes throughout the year and my employer withholds that amount, but I'm eligible for a $200 non-refundable tax credit when I file my taxes, will I receive a $200 refund at the time of filing, or is this credit non-refundable?

[xmasbaby0]

See this thread for two good explanations.

https://ttlc.intuit.com/community/taxes/discussion/what-is-nonrefundable-credit/00/557501

[shubham-123]

I am still not clear. The thread doesn't talk about employer withholding. I don't think it should affect anything, hence in my example, I should get 200$ refund but wanted to confirm here.

[VolvoGirl]

A non-refundable credit can only reduce the tax on your income to zero.  So then you could get back any withholding taken out.  So if the tax was $500 and you have a 200 credit your tax is reduced to $300.  Then the withholding is subtracted.  So in that case you would get a 200 refund from withholding.  In that example the refund just happens to be the same amount as the credit.  

A refundable credit would add to any refund you were getting or reduce a tax due.  

[xmasbaby0]

Not sure why you are asking about employer withholding.   If you have tax due, a non-refundable credit can reduce the tax you owe.   If your tax  owed is reduced to zero, then that's it.  The "credit" is not added to your refund.