Keith has a 2016 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?

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Quizplus · Accepted Answer

The maximum credit allowed for the American Opportunity tax credit is $2,500, but it is limited to the amount of tax liability before the credit. Keith's tax liability before the credit is $2,250, so the maximum credit he can receive is $2,250. Since he paid $2,600 in qualifying expenses, he will receive the full amount of the credit. Therefore, the amount of his American Opportunity tax credit allowed is $2,250.

Keith Has a 2016 Tax Liability of $2,250 Before Taking