What are tax credits? Your adjustments, deductions, and exemptions reduce your taxable income. Tax credits, on the other hand, are directly applied to the tax that you pay. You may take tax credits regardless of whether you itemize deductions. Many credits are limited, based on income levels, so the amount of a credit may be reduced for high-income taxpayers. The following statement refers to refundable and nonrefundable tax credits. A tax credit that can reduce your tax liability to zero, but if the credit is more than the tax liability, the excess is not returned to you is Page 2 of tax Form 1040 lists the available tax credits. The nonrefundable tax credits are listed in the Tax and Credits section of the form. Select the tax credits. Check all that apply. U Foreign tax credit | Capital losses tax credit | Casualty and theft loss tax credit Child and dependent care credit Residential energy tax credit The Payments section of Page 2 of tax Form 1040 lists refundable tax credits. Select these tax credits from the list. Check all that apply. I Student loan interest tax credit I Social Security contributions tax credit American opportunity tax Credit Additional child tax credit Net premium tax credit