Typically, you get a tax refund because your income tax withholding from your paycheck exceeds your taxes due. But, even if you haven't worked, it's possible that you can get a tax refund, depending on your circumstances. For example, you might have paid estimated taxes on your investments if you anticipated having tax liability, and then discover that you overpaid. You might also qualify for refundable tax credits.
Estimated Tax Payments
Estimated tax payments are essentially tax withholding payments that you make on your own for income that isn't subject to income tax withholding. For example, if you have sizable income from investments, you're responsible for making estimated payments during the year. If you pay in more than you end up owing, the excess is refunded when you file your tax return. For example, if you made large estimated tax payments because you thought your stocks were going to skyrocket, but you didn't sell any of them, you'll get that money back.
American Opportunity Credit
The American opportunity credit offers a tax credit of up to $2,500 for higher education expenses, 40 percent of which is refundable. So, if your only taxable event for the year is paying tuition, you could get a refund of up to $1,000. To qualify for the credit, you must be paying tuition for yourself or someone you claim as a dependent. The student must be in her first four years of college, she can't have any felony drug convictions, and your modified adjusted gross income can't exceed certain limits.
Additional Child Tax Credit
The child tax credit gives you a credit of up to $1,000 per qualifying child, but it's not refundable. However, all isn't lost. If you don't have enough tax liability to use up the entire credit, you might qualify for the additional tax credit, which is refundable. To figure your credit, if any, you must use Form 8812.
Deductions and Nonrefundable Credits
Deductions and other tax credits that aren't refundable credits won't help you out if you're trying to get a tax refund when you don't work. Deductions can't reduce your taxable income below zero so you won't get a refund that way. Nonrefundable credits, as the name suggests, can't reduce your tax liability below zero. For example, the lifetime learning credit is another tax credit for education, but it's nonrefundable. If you qualify for a $2,000 lifetime learning credit, but your tax liability is $0, the credit essentially goes to waste.
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