what is a tax refund 
the term tax refund refers to a reimbursement made to a taxpayer for any excess amount paid in taxes to the federal or state government while taxpayers tend to look at a refund as a bonus or a stroke of luck it often represents what is essentially an interest free loan that the taxpayer made to the government it s often possible to avoid overpaying your taxes so you can keep more money in your pocket each paycheck and avoid a refund when you file your tax return understanding tax refundsit can be exciting to get a large tax refund you can expect to get a refund if you overpaid your taxes during the year this generally happens when taxes are deducted from your paycheck every time you get paid by your employer here are some reasons why a taxpayer might get a refund tax refunds are the opposite of a tax bill which refers to taxes owed by a taxpayer in the case of a tax bill you owe more taxes to the government than you paid during the year you normally have a tax bill if your employer doesn t withhold enough taxes from your paycheck to avoid overpaying you must fill out your w 4 correctly and update it if you experience a significant life change such as marriage divorce adoption a new freelance job or gig the birth of a child or a financial windfall 3special considerationstaxpayers are generally better off not overpaying their taxes in the first place because that money could be put to better use for example you could adjust your withholding or estimated quarterly taxes if you re self employed and invest that extra money in your individual retirement account ira 401 k or even an interest yielding savings account that way the money is working for you instead of for the federal government refundable tax creditsmost tax credits are nonrefundable meaning that the tax credit can only reduce a taxpayer s liability to 0 any remaining amount from a nonrefundable tax credit is automatically forfeited by the taxpayer for this reason this type of tax credit is sometimes called a wastable tax credit 56in contrast a refundable tax credit pays out in full meaning that a taxpayer is entitled to the entire amount of the credit regardless of their income or tax liability if the tax credit reduces the tax liability to below 0 then the taxpayer gets a refund 5refundable tax credits include the child tax credit is 2 000 maximum for eligible taxpayers the fully refundable portion is 1 600 for 2023 and 1 700 for 2024 789the earned income tax credit eitc gives low and moderate income workers and families a tax break the credit is 7 430 in 2023 and 7 830 in 2024 the amount of credit that a taxpayer receives depends on their income filing status and the number of children they have for example eligible taxpayers who have no children will receive 600 for tax year 2023 that figure increases to 632 for tax year 2024 1011the american opportunity tax credit aotc is a partially refundable tax credit that is available to taxpayers to offset qualified higher education expenses qhees if a taxpayer reduces their tax liability to 0 before using the entire portion of the 2 500 tax deduction then the remainder may be taken as a refundable credit up to the lesser of 40 of the remaining credit or 1 000 12low and moderate income households may qualify for the premium tax credit ptc which lowers the monthly premiums for health plans offered through the federal and state health benefit exchanges taxpayers can use all some or none of their ptc in advance i e upfront if taxpayers use less ptc than they qualify for they will get the difference as a refundable credit at tax time 13