Five Tax Credits to Boost Your Tax Refund

 Non-Refundable vs. Refundable Credits

There are two major categories of tax credits that can boost your tax refund—non-refundable and refundable.  A non-refundable tax credit can reduce your total income tax liability (the amount of federal income tax you owe for the entire tax year) to zero – but not beyond.  A refundable tax credit will pay excess beyond your tax liability.


Let’s take an example. Say your income tax liability is $950, but that you qualify for a $1,000 non-refundable credit.  If so, your income tax liability would be wiped down to zero.  However, because it is a non-refundable credit, your tax liability can’t become negative.  On the other hand, if the $1,000 credit you qualified for was refundable, you would be paid by the government $50 in excess of the $950 tax liability.

When you file your taxes in the next couple of weeks, here are five popular refundable and non-refundable tax credits that you may be eligible for:

Adoption Credit
What is it for? Qualified adoption expenses
Maximum Credit: $12,650
Income Limitations: Phases out between $189,710 and $229,710 (for 2012)
Refundable? The adoption credit was formerly refundable but is now non-refundable.
Special Notes: Although non-refundable, any unused portion may be carried forward for up to five future tax years.
Learn More:
Child Tax Credit
What is it for? Dependent children you support under age 17
Maximum Credit: $1,000 per child
Refundable? Mostly no, but a portion is refundable for certain low income families
Learn More:
Child & Dependent Care Tax Credit
What is it for? Expenses for child and dependent care so you can go to work
Maximum Credit: Varies based on income; those with AGI exceeding $43,000 have a maximum credit of $600 if care was paid to supervise one child or $1,200 if paid care was for two or more children
Income Limitations: There is no maximum income limit to be eligible for the credit
Refundable? This credit is non-refundable
Learn More:
Earned Income Tax Credit
What is it for? A credit for working, paid to low to moderate income workers
Maximum Credit: Varies based on number of children, from $475 (no children) to $5,891 (3 or more children)
Income Limitations: Maximum eligible income varies based on number of children and filing status but ranges from about $14,000 (single, no children) to $50,270 (married with three or more children)
Refundable? Refundable
Learn More:
Non-business Energy Credit
What is it for? Certain improvements to your home that reduce your energy consumption
Maximum Credit: For the most common improvements, the lifetime maximum is $500, provided the expense you incur are at least $5,000
Income Limitations: None
Refundable? Non-refundable
Learn More:

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN,, The Wall Street Journal,, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (1) Leave your comment

  1. My wife and I made several improvements to our home in 2012. I am trying to use the allowable
    Sales Tax deduction figured via Turbo Tax-over $6000., but the Tax still owed does not change, why? I thought this is a legal tax deduction.

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