What is a Refundable tax credit?
A refundable tax credit is a tax benefit that provides a cash refund to taxpayers, even when their total tax liability is reduced to zero, making it more valuable than non-refundable credits, which only reduce taxes owed. Under the One Big Beautiful Bill Act, the Child & dependent tax credits include a refundable portion of up to $1,400 per qualifying child, calculated as 15% of earned income in excess of $2,500. Families can maximize refundable benefits through strategic Traditional 401k contribution timing and coordination with other tax strategies.
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