What's the difference between a refundable and a nonrefundable tax credit?

A nonrefundable credit can reduce your tax bill down to zero but no further; any leftover credit is simply lost. A refundable credit can push your tax below zero, meaning the IRS sends you the difference as a refund even if you owed nothing. The Earned Income Tax Credit is fully refundable, and part of the Child Tax Credit (the Additional Child Tax Credit) is refundable up to a limit the IRS sets each year. Education credits are a mix: the American Opportunity Credit is partly refundable, while the Lifetime Learning Credit is not. This distinction matters most for lower-income filers, because a nonrefundable credit is worthless if you already owe nothing, whereas a refundable one still puts cash in your pocket.