Child Tax Credit and Saver's Credit

Question

if I owe $1,700 in taxes. I have a child which is $2,000 (refundable) tax credit. And I have a savers credit (nonrefundable) for $1,000.

Does the savers credit get applied first, and then the child tax credit to cover the rest, and then I would get refunded $1300.

Or do they apply child credit first. And I would only get refunded $300 since I wouldn’t any tax liability left for the savers credit to deduct

BradyP · Answer

Hi Dleclair7,

Nonrefundable credits are applied to your tax liability first in order to be most beneficial towards you, so in this case the $1,000 savers credit would be applied to your $1,700 tax liability first, reducing your liability to $700, then the $2,000 child tax credit would be applied, causing a refund of $1,300.

Hope this helps!

JanaA · Answer

Hello Dleclair7!

Welcome to FreeTaxUSA!  Refundable credits are applied after non-refundable credits have reduced your tax liability.

For 2024, the child tax credit (CTC) is not refundable. There is another credit, the Additional Child Tax Credit (ACTC) that is refundable. If you are not able to fully deduct the CTC, you may be able to qualify for the ACTC. In this case, some of the credit may become refundable.

The Additional Child Tax Credit allows you to receive up to $1,700 of the $2,000 Child Tax Credit per child as a refund.

Without access to your personal return information, it can be difficult to say for sure how the tax credits will be applied.

If you have a tax liability of $1700, the savers credit would be applied first. Leaving you with $700 in tax liability. The CTC would then be applied. As your CTC is greater than your tax liability, this may qualify you for the ACTC and could result in a refund.

Our 2024 software is live. You are welcome to enter your information to see a general idea of what your refund could look like. This will be the best way to see how the credits will be applied to your personal return.

AlexO · Answer

Dleclair7,

That is a great question!

Keep in mind, that the Child Tax Credit is a nonrefundable credit. However, if you don't use the full $2,000 of the Child Tax Credit, you may qualify for the Additional Child Tax Credit, which is refundable up to $1,700.

Thus, in your case, it would likely be most beneficial to apply the Savers Credit first then reduce the rest of your tax by the Child Tax Credit. Then additional Child Tax Credit amounts will be refunded via the Additional Child Tax Credit, given that you qualify.