"I get a refund every year. Does this credit help me?"

Your employer withholds tax from each paycheck based on your W-4. At filing, the IRS compares what was withheld to what you actually owed. Withheld more than owed: refund. Less: balance due. Either way, you owed tax during the year.

The credit reduces the tax you owed, not your refund or your balance due. With withholding unchanged, a lower tax means a bigger refund or a smaller bill. Same $1,700 either way. (Source: §25F(a))

James owes $6,000 and had $7,500 withheld. Without the credit: refund $1,500. He donates $1,700. Tax falls to $4,300. Withheld $7,500. Refund $3,200.

It works the same if you usually owe at filing. Say you'd owe $900 in April. After a $1,700 credit, you'd get $800 back instead.

If you pay quarterly estimated tax instead, because you're self-employed or retired, you can lower those payments once you've donated. Remember the credit can't reduce self-employment tax. (Source: §26(a))

Example. Ruth is retired and pays $600 of estimated tax each quarter. Her federal income tax for 2027 will be about $2,400. She donates $1,700 in January 2027, before her first payment. Her tax after the credit is about $700, so she could pay about $175 a quarter instead of $600. Illustrative figures. Check the estimated tax rules with your preparer so you don't underpay.

A refundable credit, like the Earned Income Tax Credit, can pay you more than you owed. This one can't. It can bring your federal income tax to zero, and the part it can't use waits for next year. That's all "non-refundable" means. (Source: §25F(f))

Your refund doesn't tell you. Your tax does. On last year's Form 1040, line 22 is your income tax after credits like the child tax credit. That's close to the room this credit has. Line 24, total tax, also includes self-employment tax and other taxes this credit can't reduce. (Source: §25F(f)(1), §26(a))

If line 22 was $1,700 or more and your income is about the same in 2027, you can likely use the whole credit. If it was lower, the rest carries forward. The calculator does this for you.

Anyone whose federal income tax for the year, after other credits, is under $1,700. Retirees on modest income, students, part-year workers, and families with large child tax credits. For them, the unused part carries forward up to five years, oldest first. (Source: §25F(f))

Example. Sam and Lena have two young children. Their tax before credits is $5,000, and the child tax credit takes $4,400 off. That leaves $600 for this credit. They donate $1,700, use $600 in 2027 and carry $1,100 to 2028. Illustrative figures.

Last year's return is only a guide. If your income drops in 2027, because you retire, change jobs or take leave, your tax may fall below $1,700. You don't lose the difference. It carries forward. If you've also lowered your W-4, check it again so you don't owe at filing. (Source: §25F(f))

Adjust your W-4 after you donate, and the credit shows up in your paychecks instead of your refund. Get the credit in your paycheck

• Reading a big refund as owing no tax.
• Using line 24 of your 1040 as your room. Use line 22.
• Forgetting that the child tax credit comes off first.
• Lowering your W-4 and expecting the same refund. The credit moves into your paychecks instead.