If I get a large investment tax credit that exceeds the taxes that I owe, do I get a tax refund, or is the credit lost? If excess credits cannot be turned into a refund can I defer them to another year?

For example, let's say in 2016 I end up owing an $30,000 in federal income taxes and I have already paid $28,500 of that due to employer withholding, so I owe an additional $1,500. But let's say I also have an additional federal income tax credit of $2000. Will that allow me to claim a $500 refund?

1 Answer 1


Yes you will get a $500 refund. When you calculate your taxes you calculate a total amount of tax due regardless of how much was sent in to the IRS before you filed your return.

If your tax liability calculation including the tax rebate is $28,000 ($30,000 - $2,000), and you've already paid $28,500, then the government owes you $500.

  • 2
    Note that this is because the person does owe taxes, but has already (over)paid them via withholding. It would be different if the credit actually reduced the total tax bill to less than zero. (It's clear that's not what this question is asking about, but I think it's worth clarifying, because it's easy to mix the two up, especially based on the question title.)
    – BrenBarn
    Commented Jul 21, 2016 at 1:39

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