A tax credit is an amount of money that taxpayers can subtract from the taxes they owe the government. There are two types of tax credits: refundable and nonrefundable. A refundable tax credit can be used to reduce the amount of taxes owed, and if the credit is more than the amount of taxes owed, taxpayers will receive a refund for the difference. A nonrefundable tax credit can only be used to reduce the amount of taxes owed; it cannot result in a refund.