Question

f a taxpayer claiming the American Opportunity Tax Credit has their tax liability reduced to zero, what is the maximum amount they may receive as a refundable credit?
25% of the credit, up to $2,000.
40% of the credit, up to $1,000.
100% of the first $2,000 of qualified education expenses.
100% of the first $4,000 of qualified education expenses.

Answer 1

40% of the credit, up to $1,000.

Explanation: The AOTC is worth up to $2,500 (100% of first $2,000 plus 25% of the next $2,000); up to 40% of the credit (maximum $1,000) is refundable if tax liability is reduced to zero.