Nonrefundable Credit vs Refundable Credit

A nonrefundable credit can reduce your tax liability to 0 (zero); however, it cannot result in a refund. If, for example, you qualify for a $350 nonrefundable credit and your tax liability is only $200, you will only receive a $200 credit. If your tax liability is zero, you would not receive the credit at all, even though you are otherwise eligible.

A refundable credit can increase your refund or decrease the amount you owe. You can qualify for a refundable credit even if you do not have federal income tax withheld.