What’s the difference between a non-refundable and a refundable tax credit?

The key difference between a non-refundable and a refundable tax credit is that non-refundable tax credits are designed to reduce your tax payable to zero and don’t result in a tax refund. Refundable tax credits, on the other hand, not only reduce the amount of tax you have to pay, but any excess tax credit amount results in a tax refund from the government.

Example: Your tax owing for 2023 is $250; fortunately, you’re able to claim $600 in non-refundable tax credits on your return. While these credits will reduce your amount owing to zero, the remaining credit amount ($600 - $250 = $350) won’t be refunded to you.

As mentioned, refundable credits behave a little differently. Let’s assume that in addition to claiming the non-refundable credits in the previous example you were also able to claim $200 in refundable tax credits. Since your tax payable has already been reduced to zero by your non-refundable tax credits, you’ll get a refund of $200 for the total refundable credits amount.