Answer and Explanation:
As we know that the credit amount should be allowed a qualified deduction of 100% till $2,000 and the next 25% is $2,000
In the given situation, the credit amount would be
= $1,600 × 100%
= $1,600
As the AGI is $175,000 i.e. exceeded the prescribed amount i.e. $160,000 so it would be phased out till $180,000
So, after considering the phase out application limits, the credit is
= $1,600 × ($180,000 - $175,000) ÷ ($180,000 - $160,000)
= $400
So, the total credit is $400 out of which $160 is refundable and the remaining balance i.e. $240 would be non-refundable
