Which tax credits are refundable?

The Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) are both examples of refundable tax credits. Refundable tax credits allow a taxpayer to receive a refund if the credit amount exceeds their tax liability, meaning they can get money back from the government even if they owe no taxes.

The EITC is specifically designed to benefit low- to moderate-income working individuals and families, providing financial relief. The ACTC provides additional benefits for families with qualifying children, contributing to the support of dependent care expenses.

In contrast, the Child and Dependent Care Credit is nonrefundable, meaning it can only reduce tax liability to zero, but any amount beyond that is not refunded. The Lifetime Learning Credit and the American Opportunity Credit are also nonrefundable. While they provide significant benefits to help with education costs, they do not offer the potential for a refund if they exceed the taxpayer's liability. Thus, the option highlighting the EITC and ACTC accurately identifies refundable credits, as it includes those that can lead to a refund even in cases of zero tax liability.