Question
What is the refundable portion of the American Opportunity Tax Credit (AOTC) that the Davises are qualified to claim?
Answers
GPT-4o mini
The American Opportunity Tax Credit (AOTC) provides a maximum credit of $2,500 per eligible student for qualified education expenses in the first four years of higher education. Of this amount, 40% is refundable, which means that if the credit exceeds the tax liability, the taxpayer can receive 40% of the maximum credit as a refund.
To calculate the refundable portion for an eligible taxpayer:
1. Determine the AOTC amount they qualify for (up to $2,500).
2. Calculate the refundable portion, which is 40% of the AOTC amount.
For example, if the Davises qualify for the full $2,500 AOTC, the refundable portion would be:
\[ 40\% \times \$2,500 = \$1,000 \]
Therefore, if the Davises qualify for the maximum amount, they would be able to claim a refundable portion of $1,000. If they qualified for a lesser amount, you would apply the same formula to find the refundable portion.
To calculate the refundable portion for an eligible taxpayer:
1. Determine the AOTC amount they qualify for (up to $2,500).
2. Calculate the refundable portion, which is 40% of the AOTC amount.
For example, if the Davises qualify for the full $2,500 AOTC, the refundable portion would be:
\[ 40\% \times \$2,500 = \$1,000 \]
Therefore, if the Davises qualify for the maximum amount, they would be able to claim a refundable portion of $1,000. If they qualified for a lesser amount, you would apply the same formula to find the refundable portion.