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Is it possible that this credit could increase a return by 1k. In other words, if I was to receive $500 dollars w/out the credit, could my return increase by 1k to $1500 if I qualify for the max. credit?
Thanks,
Jr
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Is it possible that this credit could increase a return by 1k. In other words, if I was to receive $500 dollars w/out the credit, could my return increase by 1k to $1500 if I qualify for the max. credit?

I answered this question at post 48722. To view replies to your posts, click on the reply link on your MyFool page or any message board page.

Phil Marti
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"Kinda sorta. It reduces your tax dollar for dollar, but it can't reduce it below zero."

Mr. Marti: I appreciate your help, however, I am not certain if a credit that reduces my taxes dollar for dollar has the effect of increasing my return "dollar for dollar." Again, could a $500 return increase to $1500 if I qualify for the maximum credit?

Thanks, and I apologize for my ignorance regarding this issue.
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I think, if I understand the question correctly, you are asking whether the education credits are REFUNDABLE credits. That means, if you only had $500 withheld from your paycheck, could you get more than $500 back as a refund? The answer is no, it is not refundable. You can't get more federal tax back than the amount you paid or had withheld during the year because of this credit.
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Again, could a $500 return increase to $1500 if I qualify for the maximum credit?

Maybe yes; maybe no. The answer depends on how much your tax is and how much you prepaid. Take a look at lines 40 and higher on the 1040, and you'll see how it works. Do it once with the credit and once without, and you'll see the effect of the credit on your refund.

Phil Marti
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