Intuit Academy Tax Practice Exam

Which of the following tax credits is non-refundable?

1. Premium Tax Credit

2. Child Tax Credit

3. Earned Income Credit

4. Lifetime Learning Credit

The correct answer is: Child Tax Credit

The Child Tax Credit pertains to a specific benefit for families with dependent children, but it has undergone changes in terms of its refundability. As of the Tax Cuts and Jobs Act of 2017, the credit was expanded and made partially refundable, allowing eligible taxpayers to receive a refund for a portion of the credit even if it exceeded their tax liability. Therefore, it is classified as refundable, not non-refundable. In contrast, the Lifetime Learning Credit is a non-refundable tax credit intended to help offset the costs of higher education. This means it can reduce a taxpayer's liability down to zero, but any excess amount over the tax owed cannot be refunded to the taxpayer. Understanding the difference between refundable and non-refundable credits is essential; refundable credits can give a refund even if no tax is owed, while non-refundable credits cannot be applied in any manner beyond reducing tax owed. Thus, the Lifetime Learning Credit exemplifies a non-refundable tax benefit, making it the appropriate answer in the context of the question.