What Form 8863 (2017) Is For
Form 8863 (2017) lets you claim education tax credits from the Internal Revenue Service for qualified education expenses paid during the year. It is used to calculate the American Opportunity Tax Credit and the Lifetime Learning Credit based on tuition and fees, course materials, and other qualified expenses. The form supports an eligible student whose enrollment meets the rules outlined in Publication 970 and matches your credit amounts with information from Form 1098-T.
These credits apply to postsecondary institutions, including universities, community colleges, and trade schools. Form 8863 relies on the amounts in Boxes 1, 2, and 5 to verify tuition payments, scholarships, and grants. The instructions also clarify which academic periods, student activity fees, and tax-free educational assistance qualify.
When You’d Use Form 8863 (2017)
Form 8863 is filed with Form 1040 when college expenses are paid for an eligible student during the tax year. The form applies to qualified tuition and fees, course materials, and other qualified costs allowed for the American Opportunity Tax Credit or the Lifetime Learning Credit. It is also required when Form 1098-T reports scholarships and grants or distributions from a Coverdell Education Savings Account or a 529 College Savings Plan.
You attach Form 8863 when filing Form 1040-X to correct a missed credit or address misreported expenses. It also applies to continuing education, noncredit courses, and certification programs. These situations require accurate reporting of academic periods and education-related expenses.
Key Rules or Details for 2017
Credits are based on qualified education expenses paid in 2017 for academic periods beginning in 2017 or the first three months of 2018. The American Opportunity Tax Credit offers up to $2,500 per eligible student, and part of the credit may be refundable. The Lifetime Learning Tax Credit provides up to $2,000 per return for undergraduate, graduate, or professional studies completed at postsecondary institutions.
Qualified expenses must be reduced by Pell Grant amounts, employer assistance, or other tax-free educational assistance listed in Publication 970. The student must attend an eligible institution and receive a Form 1098-T unless an exception applies. Costs such as room and board, medical expenses, student loan payments, and corporate software for personal use are not considered qualified expenses.
If an American Opportunity credit was denied in a prior year, Form 8862 may be required before claiming it again in a subsequent year. Payments made through prepaid tuition plans, Roth IRAs, Coverdell ESA distributions, or Form 1099-Q amounts must follow IRS rules to confirm whether they count as qualified distributions. These details ensure that reported education-related expenses meet the standards for education tax credits.
To learn how IRS payment plans work, including eligibility requirements, application steps, and payment limits, visit our IRS Payment Plans resource.
Step-by-Step (High Level)
Begin by gathering Form 1098-T, payment receipts, and records that show scholarships and grants for the academic periods covered. Review tuition and fees, course materials, and other qualified education expenses to confirm they fit Publication 970 rules. Ensure that any tax-free educational assistance is identified before initiating the calculation process.
- The taxpayer determines whether the American Opportunity Tax Credit or the Lifetime Learning Credit applies to each eligible student for the year.
- The taxpayer calculates qualified expenses after subtracting Pell Grants, employer aid, and other tax-free educational assistance.
- The taxpayer confirms whether Coverdell ESA or 529 plan distributions were used for qualified expenses.
- The taxpayer completes Part III for each student and enters the required enrollment details.
- The taxpayer finishes Parts I and II, then transfers the totals to Form 1040 and attaches Form 8863.
To find guidance on completing, submitting, or correcting IRS forms, see our IRS Form Help Center for step-by-step assistance.
Common Mistakes and How to Avoid Them
Processing delays frequently arise from preventable filing errors that disrupt IRS review procedures. Identifying documented issues and applying corrective steps improves compliance and supports timely resolution. Accurate submissions ensure the agency can verify credits and reconcile reported amounts efficiently.
- Missing Signatures: Paper-filed returns are often rejected when required signatures are left blank, and the taxpayer reviews every signature line before submission.
- Mismatched Identification Numbers: Delays occur when SSNs or EINs differ from IRS records, and the taxpayer confirms all identifiers against official documents.
- Incomplete Attachments: Education credit claims are frequently paused when Form 1098-T or supporting expense records are omitted, and the taxpayer includes all required documentation.
- Incorrect Credit Calculations: Entry errors occur when Box 1 or Box 5 amounts are transcribed inaccurately, and the taxpayer verifies that each figure matches the corresponding quantity on Form 1098-T.
- Late Submission: Filing issues arise when returns or amendments are submitted after statutory deadlines, and the taxpayer transmits all forms within the required timeframe.
If you need help correcting penalty notices or applying for IRS penalty relief, review our IRS Penalty Abatement guide for clear, step-by-step instructions.
What Happens After You File
The Internal Revenue Service compares the information on Form 8863 with the data reported on the Form 1098-T Tuition Statement. Any differences in Box 1, Box 2, or Box 5 amounts can trigger requests for payment receipts or supporting documentation. Refunds that include refundable American Opportunity credits follow the standard Form 1040 processing timeline when all entries match IRS records.
Adjustments may be required if tuition refunds or other education-related changes occur after the filing date. These updates can affect eligibility for the claimed credit and may require recalculating qualified expenses. Form 1040-X is used when a previously filed tax return involves the correction of a credit.
Frequently Asked Questions
Can Form 8863 credits be claimed when using 529 plans or prepaid tuition plans?
Education credits may be claimed when the same qualified expenses are not used for tax-free withdrawals from 529 College Savings Plans or prepaid tuition plans. Amounts treated as qualified distributions under Form 1099-Q cannot also support the American Opportunity Tax Credit or Lifetime Learning Credit. Taxpayers must separate expenses clearly to avoid double benefits.
Do student loans count as qualified expenses for these credits?
Student loans can fund tuition and fees, course materials, and other qualified expenses during the academic period. Credits may be claimed when the loan proceeds are used to pay eligible items defined in Publication 970. Borrowed funds must be used for qualified higher education expense categories to meet IRS standards.
Is a Form 1098-T required to claim education tax credits?
A Form 1098-T is generally required, and most post-secondary institutions issue it annually. Exceptions apply when the school is not required to file the statement or when scholarships and grants fully cover tuition. Taxpayers must still document qualified expenses with payment receipts or account records to substantiate their deductions.
Are noncredit courses eligible for the Lifetime Learning Credit?
Noncredit courses may qualify when they improve job skills or support continuing education programs. The Lifetime Learning Credit allows claims for coursework taken at eligible institutions, including trade schools and certification providers. These expenses must meet the qualified higher education expense rules described in IRS Publication 970.
Can IRA or Roth IRA withdrawals affect eligibility for education credits?
Withdrawals from an IRA account or Roth IRAs used for education-related expenses can limit credit eligibility when treated as tax-free educational assistance. These amounts reduce qualified expenses for Form 8863 calculations. Taxpayers must review how distributions interact with Qualified Higher Education Expense guidelines to ensure accurate reporting.
