Question

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?a. $0b. $2,600c. $4,000d. $2,250e. $2,150

Answer 1

E) $2,150

Step-by-step explanation:

American Opportunity tax credit covers 100% of the initial $2,000 in qualifying expenses, plus 25% of the next $2,000 in qualifying expenses. In this case since Keith had $2,600 in qualifying expenses, his tax credit would be $2,000 plus $150 (= 25% x $600) = $2,150