I don't understand. Here is the information from the IRS web site:
"Q7. How will the American opportunity tax credit affect my income tax return?
A. You will be able to reduce your tax liability one dollar for each dollar of credit for which you're eligible. If the amount of the American opportunity tax credit for which you're eligible is more than your tax liability, the amount of the credit that is more than your tax liability is refundable to you, up to a maximum refund of 40 percent of the amount of the credit for which you’re eligible."
That is confusing! Let's say I have $1900 of income tax withheld and I make $22000 this year. I spent $3000 on college tuition and books. How much will I get back?
Without knowing what your tax liability would be it's not possible to say for sure. You have not provided anywhere near enough information to guesstimate your tax liability. Your tax liability on $20k could vary from as little as $0 to as much as about $1,754 depending upon your filing status and dependency status. The amount of any tax withheld from your pay is irrelevant to the credit.
The maximum credit is $2,500, of which up to $1,000 can be refundable. If your tax liability was $0 the credit would be worth $1,000. If your tax liability was $1,754 you'd get the full $2,500.
Boston is correct about the max credit in your case. I blew that one! TFTP. Report Abuse
Actually both above answers are off by a bit. The AOC is 100% of the first $2,000 in eligible expenses plus 25% of the next $2,000. So with $3,000 of eligible expenses the credit would max out at $2,250 if your tax liability was high enough.
From the IRS FAQ on the AOC at http://www.irs.gov/newsroom/article/0,,i… :
Q6. How is the American opportunity tax credit calculated?
A. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
If your tuition is $3000, you will NOT get a $2500 credit. It would be $2000.
So, if income is $22000.
$22000 with standard deduction, no kids, just you is tax of $1480, which this credit could cover.
However, if you are under 24, you will not get a refund over and above that. If you are 25 and older, potentially upto $800 is refundable.