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Tax Credit

An amount of money that taxpayers can subtract directly from the taxes they owe, which reduces their overall tax bill.

Refundable Tax Credit

A type of tax credit that can not only reduce a taxpayer's tax bill to zero but can also result in money being paid back to the taxpayer as a refund if the credit amount is greater than the taxes owed.

Non-refundable Tax Credit

A type of tax credit that can reduce a taxpayer's tax liability to zero, but any portion of the credit that exceeds the amount of taxes owed is lost and not paid back as a refund.

Internal Revenue Code

The collection of laws enacted by Congress that govern federal tax matters in the United States, which the IRS enforces.

Taxable Year

The accounting period, usually 12 months, for which a taxpayer files an income tax return (for most individuals, this is the calendar year).

Carryforward

A tax rule that allows a taxpayer to apply an unused tax credit or deduction from a past tax year to a future tax year to lower future tax bills.

Third-party affidavit

A written statement sworn to be true by someone who is not directly involved in the tax filing, used here to help verify the facts of an adoption for tax purposes.