What is the difference between Schedule 3, Part I and Part II?

Part I holds nonrefundable credits that flow to Line 21 and can only reduce tax to zero. Part II holds other payments and refundable credits that flow to Line 31 and can create or grow a refund.

Can nonrefundable credits create a refund?

No — they can cut your combined tax down to zero, but any excess simply goes unused. Only refundable credits and payments take you past zero.

Where do the Schedule 3 totals land?

The Part I total posts to Line 21 as nonrefundable credits; the Part II total posts to Line 31 as other payments and refundable credits.

2025 Form 1040, Schedule 3 → Lines 21 and 31

Schedule 3: Credits and Payments That Cut Tax and Build Refunds

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

Schedule 3 has two halves with opposite powers: Part I collects nonrefundable credits that flow to Line 21 and can cut your tax to zero but not below, while Part II collects other payments and refundable credits that flow to Line 31 and can build your refund.

Part I: nonrefundable credits to Line 21

Part I gathers the nonrefundable credits — §§21–25A, including the child and dependent care credit, education credits, and the retirement savings credit — plus the general business and prior-year minimum tax credits. They reduce the combined tax from Line 24, but the floor is zero: excess credit goes unused, never refunded.

Part II: payments and refundable credits to Line 31

Part II holds everything that behaves like a payment: net premium tax credit, excess Social Security tax withheld, fuel-tax credits, and refundable pieces such as the additional child tax credit from Schedule 8812. These post to Line 31 and are added to withholding and estimates on the payments side of the ledger.

Nonrefundable vs refundable: the zero line

The whole schedule turns on one question: can it take you below zero? Part I credits stop at zero tax; Part II amounts keep going into refund territory. Claim both halves you qualify for, in the right half — a refundable credit parked in Part I leaves money on the table. For the full sequence of tax, credits, and payments, see chapter 4 of the Guide.

From the practice: How tax, credits, and payments fit together — chapter 4 →

Questions, answered

What is the difference between Schedule 3, Part I and Part II?: Part I holds nonrefundable credits that flow to Line 21 and can only reduce tax to zero. Part II holds other payments and refundable credits that flow to Line 31 and can create or grow a refund.
Can nonrefundable credits create a refund?: No — they can cut your combined tax down to zero, but any excess simply goes unused. Only refundable credits and payments take you past zero.
Where do the Schedule 3 totals land?: The Part I total posts to Line 21 as nonrefundable credits; the Part II total posts to Line 31 as other payments and refundable credits.

Keep reading: Total Tax · Child Tax Credit · Education Credits

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