Understanding Tax Credits:

 Tax credits are powerful tools that reduce the amount of tax you owe. They are categorized into two main types: Refundable Credits and Non-Refundable Credits. Understanding the difference can help you maximize your tax savings. 

 Refundable credits are unique because they allow taxpayers to receive a refund even if their tax liability is reduced to zero. For instance, credits like the Earned Income Tax Credit (EITC), the partially refundable Child Tax Credit, and the American Opportunity Credit (partially refundable) can result in additional funds in your pocket. This makes refundable credits particularly beneficial for individuals and families with low income or little tax liability. For example, if your tax due is zero after applying other credits, the remaining balance of a refundable credit will still be issued to you as a refund.