Tax credits can help you keep more of your hard-earned cash, but some are better than others.
There are two main types of tax credits: nonrefundable and refundable.
A nonrefundable credit lowers the amount of your tax bill, which means it only benefits you if you owe taxes when you file a return. So, if you are among the millions of taxpayers who receive a refund at tax time, a nonrefundable credit won’t help you. It’s effectively useless to you, even if you qualify for it.
On the other hand, a refundable credit can help anyone who qualifies for it. That’s because it can not only boost the size of your refund, but it can result in you receiving a refund even if you don’t owe any taxes.
Here’s a simple, if simplified, way to remember all this:
- Nonrefundable = no refund
- Refundable = refund
Here is a rundown of currently available refundable federal income tax credits, along with a list of nonrefundable credits — which is unfortunately the majority of credits.
Earned income tax credit
Refundability of this tax credit: Fully
The earned income tax credit is intended to help boost the finances of workers with low or moderate earned incomes. The size of the credit depends on several factors, including the number of dependents you have.
The earned income credit is one of the most valuable federal income tax credits in terms of its maximum value. However, keep in mind that, by law, the IRS cannot issue refunds before mid-February to anyone who claims this credit. So, you might have to wait a bit to get your money.
The maximum value of this credit for the 2024 tax year ranges from $632 to $7,830, depending on how many dependents you have. For 2025, it ranges from $649 to $8,046.
Additional child tax credit
Refundability of this tax credit: Partially
A refundable tax credit can be fully or partially refundable. If it’s fully refundable, the full value of the credit can be added to your refund or given to you as a refund. If it’s partially refundable, only part of the full value can be refunded to you.
The additional child tax credit is partially refundable. Its maximum value is $2,000 (for both 2024 and 2025), but only $1,700 of it is refundable.
The additional child tax credit is for folks who have dependents that meet certain eligibility requirements, such as being under the age of 17 at the end of the tax year. An easy way to determine whether you are eligible for this credit is to use the Interactive Tax Assistant, a free online tool from the IRS.
Just note that the additional child tax credit is like the earned income credit in that, by law, the IRS cannot issue refunds before mid-February to anyone who claims this credit
American opportunity tax credit
Refundability of this tax credit: Partially
If you are an eligible student in your first four years of higher education and paid related expenses like tuition, you can claim the American opportunity tax credit. Or, if you are the parent or guardian of a student who is eligible for this credit and you paid their tuition, you can claim the credit.
The American opportunity credit is partially refundable. Its maximum value is up to $2,500 (for both 2024 and 2025), but you can receive only up to $1,000 of it as a refund.
Here are the student eligibility requirements for the credit as outlined by the IRS:
- “Be pursuing a degree or other recognized education credential,
- Be enrolled at least half time for at least one academic period beginning in the tax year,
- Not have finished the first four years of higher education at the beginning of the tax year,
- Not have claimed the AOTC or the former Hope credit for more than four tax years, or
- Not have a felony drug conviction at the end of the tax year.”
Nonrefundable tax credits
Unfortunately, most tax credits are not refundable. So, if you do not owe taxes, you will not benefit from them. Nonrefundable credits include the:
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