What Can Give You a Refund Even With No Tax Liability?

The IRS treats refundable tax credits as tax payments, so you can receive a refund even if you owe no taxes.

A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com

While a tax refund usually applies when you pay more than you owe, it is possible to get back more than you paid. In fact, even those with no tax liability can get a refund thanks to refundable tax credits. All tax credits offset your tax liability dollar-for-dollar, and refundable tax credits result in a refund if they exceed your total tax due.

Adoption Credit

According to the Internal Revenue Service, the adoption tax credit is the largest refundable tax credit available to individual taxpayers. Currently, families who adopt may qualify for a refundable tax credit of up to $13,360 per child to help cover expenses associated with adopting. If you attempt to adopt a U.S. child, and the adoption doesn't go through, you may still qualify for the credit. Couples with a modified adjusted gross income of $185,210 or less may qualify for the full amount of this credit. The amount of the credit is reduced for those who earn more than $185,210 and phases out completely for couples earning more than $225,210.

American Opportunity Tax Credit

The American Opportunity Tax Credit, formerly known as the Hope Credit, is designed to help offset the cost of higher education. As of 2012, this partially-refundable credit covers 100 percent of the first $2,000 spent on tuition, books, fees and other college expenses for yourself, your spouse or any dependent that you claim on your tax return. Taxpayers can also deduct 25 percent of the next $2,000 of expenses, for a maximum credit of $2,500. Just 40 percent of the total credit amount is refundable, while the other 60 percent is treated as a non-refundable credit, which offsets taxes due but can't be refunded. Individual taxpayers with an adjusted gross income of $80,000 or less and married taxpayers with an adjusted gross income of $160,000 or less qualify for the full amount of this credit. The credit is phased out above this income level.

Child and Additional Child Tax Credit

Taxpayers with children may qualify for a non-refundable tax credit of $1,000 for each child under the age of 17. The amount of this credit is reduced for married couples filing jointly with an adjusted gross income of $110,000 or more, and for individuals with an adjusted gross income of $75,000 or more. The amount of the credit is reduced by $50 for each $1,000 that your income exceeds these levels. If your child tax credits exceed your tax liability, part of the unused portion of the child credit may be refundable. This unused portion is known as the additional child tax credit. The additional child tax credit is equal to the smaller of the unused portion of the tax credit or 15 percent of your earned income over $3,000.

Earned Income Tax Credit

Individual taxpayers who earn less than $49,078 per year as of 2012 may qualify for a refundable earned income tax credit. This credit may be as high as $5,751 depending on your income, age and number of dependents. Even taxpayers without children may qualify. The average person who files for this credit receives $2,200, though a full 20 percent of those who qualify fail to file for the credit according to "Time" magazine.

Photo Credits

  • A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com

About the Author

Emily Beach works in the commercial construction industry in Maryland. She received her LEED accreditation from the U.S. Green Building Council in 2008 and is in the process of working towards an Architectural Hardware Consultant certification from the Door and Hardware Institute. She received a bachelor's degree in economics and management from Goucher College in Towson, Maryland.

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