Tax Time Windfall: Family Gets $54,000 Tax Refund

[Geee]

WalletPop:

The IRS recently announced that the average federal income tax refund this year is expected to be $3,000. That makes the Wards of Smithfield, N.C., quite above average. After they had their taxes prepared this year, Thelma and Dan Ward found out they're entitled to an astounding $54,000 refund.

The Wards make about $39,000 per year. You would guess that would make a tax refund such as theirs impossible, right? Not at all, thanks to refundable tax credits.

Refundable tax credits are the new darling of the tax world. Traditional tax credits reduce the tax that you owe dollar for dollar until you reach zero tax liability -- your tax refund cannot, with a traditional tax credit, exceed the amount of your withholding. However, refundable tax credits mean that you can reduce your tax liability to zero and then have the entire amount of the additional credit refunded to you. That's a significant tax bonus.