Which of the following is a 'refundable' tax credit?

Answer options:

Foreign Tax Credit

Lifetime Learning Credit

Earned Income Tax Credit (EITC)

Child and Dependent Care Credit

How to approach this question

Memorize the short list of refundable credits: EITC, Child Tax Credit (partially), American Opportunity (partially), Premium Tax Credit.

Full Answer

C.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. The Foreign Tax Credit, Lifetime Learning Credit, and Child and Dependent Care Credit are nonrefundable (can only reduce tax to zero).

Common mistakes

Confusing Child Tax Credit (partially refundable) with Child and Dependent Care Credit (nonrefundable).

Question 21 All questions Question 23

Practice the full CPA REG Practice Exam 2

72 questions · hints · full answers · grading

More questions from this exam

Q01A CPA is representing a client in an IRS examination regarding a complex tax shelter transaction....Hard Q02A tax return preparer is facing a penalty for an understatement of tax liability on a client's re...Hard Q03Taxpayer L received a Statutory Notice of Deficiency (90-day letter) from the IRS regarding a tax...Hard Q04A CPA is sued for common law negligence by a third party who relied on the CPA's audit report. Th...Hard Q05Which of the following communications between a CPA and a client would generally be protected by ...Hard

View all 72 questions →