Question

Arjun is a sophomore at the University of Iowa. For 2022, he received a Form 1098-T showing his tuition and scholarship amounts. What is the maximum amount of the American Opportunity Tax Credit Arjun is eligible to receive?

O $1,000
O $1,500
O $2,000
O $2,500

Answer 1

The maximum American Opportunity Tax Credit (AOTC) Arjun can receive is $2,500, which requires expenses beyond scholarships that qualify for the credit.

Step-by-step explanation:

The maximum amount of the American Opportunity Tax Credit (AOTC) that Arjun is eligible to receive is $2,500. The AOTC provides a credit for qualified education expenses paid for an eligible student for the first four years of higher education. Specifically, 100% of the first $2,000 in qualified expenses and 25% of the next $2,000 are eligible, totaling $2,500.

If he has expenses in excess of scholarships that qualify for the credit, Arjun can claim the full amount. However, the AOTC is also partially refundable, which means if the credit brings the amount of tax he owes to zero, he could be refunded up to $1,000.

The American Opportunity Tax Credit is a tax credit available to eligible students who are pursuing higher education. It can be claimed for qualified education expenses, such as tuition, fees, and course materials. The maximum credit amount is $2,500 per eligible student per year.

In Arjun's case, as a sophomore at the University of Iowa, he received a Form 1098-T showing his tuition and scholarship amounts. This form will provide the necessary information to determine his eligibility for the American Opportunity Tax Credit and calculate the maximum amount he can receive.