Only $1000 (40% of $2500) of the American Opportunity Credit (AOC) is refundable. The rest can only be used to offset (credit against) an actual tax liability. It sounds like it only took $423 to reduce you tax liability to zero. Look at lines 16 & 18 of form 1040. The non refundable portion of the AOC will be included in the line 20 amount (and shown on line 3 of Schedule 3). The $1000 refundable amount is on line 29.
