On average, in 2020 Americans whose adjusted gross income was between $50,000 and $75,000 paid $4,567 in taxes, according to the IRS. This kind of tax refund tends to favor middle- and higher-income families, said Sage Briscoe, federal senior policy manager for implementation with Rewiring America, an electrification non-profit. More: What is a federal tax credit? Get to know how it works, what makes it different from deductions
The bad news: People with lower incomes who pay less in taxes have less opportunity to take advantage of the credits. For example, a person who only pays $4,000 in income taxes can only use $4,000 in credits, which is less savings than a person who pays $7,000 in taxes has access to. The good news: You can potentially zero-out your federal tax bill and get a huge refund with non-refundable tax credits. Benefits can be limited by how much you pay in taxes: Many of the incentives come as "non-refundable tax credits." That means you can't get more money back in the tax rebate than you actually owe in taxes. Eligibility requirements: Some – though not all – of the incentives restrict who can use them, most on income and some on geography.
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