Keith has a 2018 tax liability of $2,250 before taking into account his American Opportunity tax credit.He paid $2,600 in qualifying expenses, was a full-time student, was not claimed as a dependent on his parents' return, and his American Opportunity tax credit was not subject to phase-out.What is the amount of his American Opportunity tax credit allowed?

Question

Quizplus · Accepted Answer

The American Opportunity tax credit can be up to $2,500 per eligible student. However, it is partially phased out for taxpayers whose MAGI exceeds certain levels. Since Keith's credit is not subject to phase-out, he can claim the full amount of $2,500 if he has at least $4,000 in qualifying expenses. Since he only has $2,600 in qualifying expenses, his credit is limited to the amount of his tax liability before the credit.

So, the amount of his American Opportunity tax credit allowed is $2,250 (the amount of his tax liability before the credit).

Keith Has a 2018 Tax Liability of $2,250 Before Taking