You are correct that up to $1000 of the American Opportunity
Credit (AOC) is refundable. However, that
does not mean that you would only
have a refund of $1000 if your credit is up to $2500. Most likely everything is fine with your
return.
Consider this simplified scenario as an example:
Total tax liability = $3000
AOC = $2500
Tax liability after subtracting the credit = $3000 - $2500 =
$500
Federal tax withholdings from W-2 = $2900
Total refund = withholdings – remaining tax liability = $2900
- $500 = $2400
In this case it looks like you would be receiving almost the
entire AOC as the refund, when it was actually used to reduce the tax liability
by the amount of the AOC.
If the total tax liability had been less than the amount of
the AOC (such as tax liability = $900), then there would be some of the credit
($1600) left over. Of that leftover
amount, up to $1000 could be included as part of the tax refund. That's what it means that it is partially refundable.
