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15 March, 18:29

Select the correct answer. How can a nonrefundable tax credit reduce the amount of taxes owed? A. It can reduce the amount of tax owed to zero, but it can't result in a refund. B. It can reduce the amount of tax owed to zero, and it can result in a refund. C. It can reduce the adjusted gross income before the tax liability is determined, but it can't result in a refund. D. It can reduce the adjusted gross income before the tax liability is determined, and it can result in a refund. E. It can reduce the gross income before deductions are applied, but it can't result in a refund.

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  1. 15 March, 18:35
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    A nonrefundable tax credit reduce the amount of taxes owed as it can reduce the amount of tax owed to zero, but it can't result in a refund.

    Option: A

    Explanation:

    A tax credit which would only reduce the debt of a taxpayer to zero is understood as a non-refundable tax credit. The money left from the loan would be immediately relinquished by the taxpayer and does not produce a tax refund if the future loan raises the taxable income like a refundable loan would. Often, a non-refundable benefit may be called a wastable tax credit, that can be compared with refundable tax credits.

    An individual taxpayer with both refundable and non-refundable tax credits, if he estimates his or her non-refundable credits before implementing his eligible refundable credits, will increase his overall credit value. Secondly, non-refundable tax deductions can be used to reduce the taxes owed.
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