ExpertHard1 markMultiple Choice
CPA · Question 55 · Area IV: Individual Taxation
Which of the following credits is a 'refundable' tax credit?
Which of the following credits is a 'refundable' tax credit?
Answer options:
A.
Earned Income Tax Credit (EITC).
B.
Foreign Tax Credit.
C.
Lifetime Learning Credit.
D.
General Business Credit.
How to approach this question
Refundable Credits: EITC, Child Tax Credit (partially), American Opportunity (40%), Premium Tax Credit. Most others are nonrefundable.
Full Answer
A.Earned Income Tax Credit (EITC).✓ Correct
The Earned Income Tax Credit (EITC) is a refundable credit, meaning it can reduce tax liability below zero and result in a refund payment to the taxpayer.
Common mistakes
Thinking the Lifetime Learning Credit is refundable (only AOTC is).
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