After George Alexander received a refund for tuition, how much did his tax liability increase by when refiguring the Lifetime Learning Credit?

The correct answer indicates that George's tax liability increased by $580 after he received a refund for tuition and refigured the Lifetime Learning Credit. This situation occurs because financial aid, including tuition refunds, affects the calculation of education credits like the Lifetime Learning Credit.

When a taxpayer claims the Lifetime Learning Credit, they must consider the total qualified educational expenses they paid. If tuition is refunded, the amount that can be claimed as a qualified expense will decrease, leading to a reduced credit. The tax credit is based on 20% of the first $10,000 spent on qualified education expenses, which means a maximum possible credit of $2,000.

If George initially received a full credit based on his original tuition payments and then had a portion of his tuition refunded, he would need to recalculate the credit reflecting the new total of qualified expenses. The increase in tax liability of $580 suggests that after applying the revised figures, the credit he could claim was reduced enough to result in a corresponding increase in his overall tax obligation.

This assessment reinforces the importance of accurately calculating education credits in light of any changes in tuition payments, as refunds can lead to adjustments in tax benefits claimed.