Refundable Credit

Posted in Finance, Accounting and Economics Terms, Total Reads: 453

Definition: Refundable Credit

It is commonly used in tax lexicon. Refundable Credit refers to a tax credit which is not limited by the owed tax amount. This means it can credit even more than the owed tax.

Tax has to be paid on the taxable income. Tax which has to be paid can be either a positive number or zero. A tax credit is a credit which reduces your tax amount. A refundable tax credit is something which reduces your tax to 0 and then goes beyond it.

If the amount of refundable credit > tax owed, the person would actually receive a refund of the difference.

If tax owed is X and the tax credit is Y. Given Y>X then 

Y-X is the refund a person would get from the government. This is true even if X was already 0 to begin with this mean the refundable credit would Y.

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