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

Answer options:

Earned Income Tax Credit (EITC).

Foreign Tax Credit.

Lifetime Learning Credit.

General Business Credit.

How to approach this question

Refundable Credits: EITC, Child Tax Credit (partially), American Opportunity (40%), Premium Tax Credit. Most others are nonrefundable.

Full Answer

A.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 payment to the taxpayer.

Common mistakes

Thinking the Lifetime Learning Credit is refundable (only AOTC is).

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Practice the full CPA REG Practice Exam 4

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