What is a Nonrefundable tax credit?
A nonrefundable tax credit is a tax benefit that directly reduces tax liability dollar-for-dollar but cannot reduce taxes below zero or generate a cash refund payment. The 2026 Child tax credit includes both nonrefundable and refundable portions, with the nonrefundable portion applied first to reduce tax liability before the refundable portion results in a potential refund. Unlike refundable credits that provide value regardless of tax owed, nonrefundable credits only benefit taxpayers with sufficient tax liability to offset.
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