If a taxpayer has a gross tax liability of $800 and a nonrefundable Adoption Tax Credit of $1,000, what is the amount owed or refund that can be expected?

If a taxpayer has a gross tax liability of $800 and a nonrefundable Adoption Tax Credit of $1,000, what is the amount owed or refund that can be expected?

• A. $0
• B. $1,000 refund
• C. $200 refund
• D. $800 owed

Answer: (A)

In this scenario, the taxpayer has a gross tax liability of $800 and a nonrefundable Adoption Tax Credit of $1,000. A nonrefundable tax credit can reduce a taxpayer's liability to zero but cannot generate a refund beyond that. Since the taxpayer's gross tax liability is $800, applying the nonrefundable Adoption Tax Credit of $1,000 will reduce the liability to $0. The remaining $200 of the credit cannot be used to generate a refund because the adoption credit is nonrefundable. Therefore, the taxpayer does not owe any additional tax and cannot receive a refund based on the excess credit. This leads to the conclusion that the total amount owed or the refund in this situation is $0.

In this scenario, the taxpayer has a gross tax liability of $800 and a nonrefundable Adoption Tax Credit of $1,000. A nonrefundable tax credit can reduce a taxpayer's liability to zero but cannot generate a refund beyond that.

Since the taxpayer's gross tax liability is $800, applying the nonrefundable Adoption Tax Credit of $1,000 will reduce the liability to $0. The remaining $200 of the credit cannot be used to generate a refund because the adoption credit is nonrefundable. Therefore, the taxpayer does not owe any additional tax and cannot receive a refund based on the excess credit.

This leads to the conclusion that the total amount owed or the refund in this situation is $0.