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How can I determine if I can collect the tax credit? Does it matter if I am getting a tax refund? Follow

Whether or not you are getting a refund does not matter. What matters is your "tax liability" - which is the total amount of federal income tax you are responsible for paying.

These energy efficiency tax credits are technically "non-refundable" which means you can't get more money back in tax credits than you pay in federal income taxes (your tax liability). Check your last year's tax return to get a sense of your tax liability (line 60 on the 2009 1040 form, called "total tax"). You can claim all of your tax credits as long as your tax liability, is greater than zero after all tax credits have been applied.

For example, say your Adjusted Gross Income (AGI) is $50,000, and your tax liability is $10,000 (before you apply tax credits), and you've had $12,000 withheld from your paychecks. In this scenario you could claim up to $10,000 in tax credits. If you are eligible for the entire $500 tax credit, then your tax liability ($10,000) would be reduced to $9,500. Since you already had $12,000 withheld, you would get a tax refund of $2,500 ($12,000 - 9,5000 = $2,500).

Or in another example, say your AGI was $50,000, your tax liability $10,000 (before tax credits were applied), and you had $9,000 withheld from your pay checks, you would still have the ability to claim up to $10,000 in tax credits. If you are eligible for the entire $500 tax credit, your tax liability ($10,000) would be reduced to $9,500 and you would owe the government $500 at the end of the year ($9,000 already paid in taxes - $9,500 tax liability = $500 final payment).

Some of the tax credits can be carried forward to future years. 

If you don't pay any taxes, then you can't get the credit.

More on tax credits.

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