Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer's tax liability.

Question

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Nonrefundable credits cannot be refunded or paid out as a cash refund if they exceed the taxpayer's tax liability. They only serve to reduce the amount of tax owed, and any excess credit is lost.

Nonrefundable Credits Are Those That Reduce the Taxpayer's Tax Liability