Question

Duncan and Ashley are a young married couple, and Ashley is finishing up her degree at BYU. In 2018, Ashley had $3,000 in qualified education expenses (assume this is calculated correctly). What is the value of Ashley’s American Opportunity Credit and how much is refundable? ​

Answer 1

Solution:

a)

A total maximum claim of $2,500 per student per year is provided to every qualifying student.

The American Opportunity credit is calculated as the sum of:

1. 100% of the first $2,000 of qualified education expenses paid for the eligible student plus,

2. An additional 25% of the next $2,000 (25% of $1,000 = $250).

Total American Opportunity credit is $2,250.

b)

40% of the credit is refundable to the extent of $1,000.

Total refundable credit is $2,250*40%= $900.