When Must the Credit Be Repaid (Recaptured)(p16)

If, after you file your 2010 tax return, you or someone else receives tax-free educational assistance for, or a refund of, an expense you used to figure an American opportunity credit on that return, you may have to repay all or part of the credit. You must refigure your American opportunity credit for 2010 as if the assistance or refund was received in 2010. Subtract the amount of the refigured credit from the amount of the credit you claimed. The result is the amount you must repay. Add the repayment (recapture) to your tax liability for the year in which you receive the assistance or refund. See the instructions for your tax return for that year to find out how to report the recapture amount. Your original 2010 tax return does not change.

You paid $7,000 tuition and fees in August 2010, and your child began college in September 2010. You filed your 2010 tax return on February 15, 2011, and claimed an American opportunity credit of $2,500. After you filed your return, you received a refund of $4,000. You must refigure your 2010 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. The refigured credit is $2,250. Include the difference of $250 in the total on the "Tax" line of your 2011 Form 1040 or 1040A.