Which statement best describes a non-transferable non-refundable tax credit?

Which statement best describes a non-transferable non-refundable tax credit?

• A. It can be transferred to another party.
• B. It is refundable for cash.
• C. It cannot be transferred and cannot create a refund.
• D. It must be repaid with interest.

Answer: (C)

A non-transferable non-refundable tax credit reduces only your own tax liability and cannot be paid out to you or transferred to someone else. It is used against what you owe; if the credit exceeds your tax due, you don’t get cash back—the excess is simply unused. This is what distinguishes it from credits that are transferable (which can be claimed by another taxpayer) or refundable (which can generate a cash refund even if you owe no tax). For example, if you owe $1,000 in tax and have a $1,500 non-transferable non-refundable credit, your tax is reduced to zero and nothing more is payable or transferable.

A non-transferable non-refundable tax credit reduces only your own tax liability and cannot be paid out to you or transferred to someone else. It is used against what you owe; if the credit exceeds your tax due, you don’t get cash back—the excess is simply unused. This is what distinguishes it from credits that are transferable (which can be claimed by another taxpayer) or refundable (which can generate a cash refund even if you owe no tax). For example, if you owe $1,000 in tax and have a $1,500 non-transferable non-refundable credit, your tax is reduced to zero and nothing more is payable or transferable.