Is the American Opportunity Credit available for the tax refund this year ?

[SharonC1 · Accepted solution]

Yes, the American Opportunity credit is available for 2018.  

The American Opportunity credit is 40% refundable. That means a portion of the credit will be refunded to you even if you don’t owe any federal income tax.

Here’s how it works. Say your American Opportunity credit is $2,500. The refundable portion is $1,000 ($2,500 x 40%). That amount is treated as a payment on your tax return (as if you had the $1,000 withheld from your wages).

The remaining $1,500 ($2,500 x 60%) is a nonrefundable credit that provides a benefit to you only if you owe federal income taxes. If you don’t owe any federal income tax because of deductions and other credits, the entire $1,000 refundable credit counts as a tax overpayment and is refunded to you.

For example, if you owe $1,900 in taxes, the nonrefundable $1,500 portion of the credit is used first to reduce your tax bill to $400. Then the first $400 of the refundable credit is used to lower your tax bill to zero. Finally, the last $600 of the refundable credit is paid to you as a tax refund.

If your federal income tax bill is $4,500, the $1,500 nonrefundable portion of the credit reduces your tax bill to $3,000. Then the $1,000 refundable credit further reduces your tax bill to $2,000.