I’m specifically referring to the refundable tax credit that is being sent out by the U.S. Government under the CARES act. What exactly is it? And more specifically will we have to pay this money back to the government?
In: Economics
If you make less than $75,000 and aren’t a dependent, you’ll get $1200 today/soon OR an extra $1200 on your tax refund when you file in early 2021 (not everyone will get their checks today).
I’m not familiar with the refundable tax credit from CARES, I know we are getting checks that are not-taxable. I haven’t read full details of the act, though.
But, a refundable tax credit is a credit that can result in the government owing you money. Lemme give example with simple numbers.
Lets say with your income and everything else taken into account, you owe $5,000 in Federal taxes total. This is in no way affected by what you pay into taxes throughout the year; this is total of what you owe for the year.
If you have a NON-refundable tax credit of $7500, you will cancel out the $5000 you owe, and owe 0. The remaining $2500 (7500-5000) is wasted.
With a $7500 REFUNDABLE tax credit, you would cancel out the $5000 owed, and get an additional $2500 owed to you.
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