- Instruction Year: 2023
Although Iowa and the IRS may have the same type of credit, it may or may not be refundable on both returns.
Nonrefundable Tax Credit
A nonrefundable tax credit will reduce your tax liability. This credit may reduce your tax liability down to zero, but it will never generate a refund. An example of this type of credit is the Tuition and Textbook Credit or any other credit taken in Step 5 of the IA 1040 individual income tax form.
Refundable Tax Credit
A refundable tax credit will also reduce your tax liability. However, if this tax credit exceeds your tax liability it will generate an Iowa refund. An example of this type of credit is the Iowa Child and Dependent Care Credit or any other credit taken in Step 6 of the IA 1040 individual income tax form.