What Form 8863 (2018) Is For
Form 8863 (2018) is the Internal Revenue Service form used to claim education tax credits for the 2018 tax year. These education credits include the American Opportunity Tax Credit and the Lifetime Learning Credit. Both credits rely on qualified education expenses reported on Form 1098-T.
Publication 970 and IRS Form 8863 instructions explain how eligible students qualify during specific academic periods. The form applies to students enrolled in a postsecondary educational institution. Tuition and fees, required materials, and specific student activity fees may qualify.
Form 8863 is based on the Taxpayer Relief Act of 1997 and utilizes data from Boxes 1, 2, and 5 of the tax return. Schools may use the Box 1 Method or the older Box 2 Method. Room and board, as well as medical expenses, do not qualify.
When You’d Use Form 8863 (2018)
You use Form 8863 when claiming the American Opportunity Credit or Lifetime Learning Tax Credit for 2018 expenses. These claims rely on qualified education expenses shown on Form 1098-T. Updated scholarships or grants may require reviewing student accounts, financial aid, and billing records.
Some taxpayers file late when new information becomes available on corrected 1098-T information files. A revised entry in Box 3, Box 4, Box 6, Box 7, or Box 8 may require the completion of Form 1040-X. Reimbursements or refunds from a bursar’s office may also affect credit amounts.
Students may receive updates through campus systems such as an eBill Suite or an e-commerce site. Offices like Student Bill Inquiry or Purchasing Services may also issue adjustments. Several universities, including Cleveland State University and Lehigh University, follow similar processes.
Key Rules or Details for 2018
Several rules determine who can claim these education credits for the 2018 tax year. A filer cannot claim a credit when listed as a dependent or married filing separately. A valid Taxpayer Identification Number must appear by the return due date.
Taxpayers must subtract tax-free educational assistance, such as Pell Grants, scholarships, and grants. Loan payments count as eligible payments for qualified expenses. Room and board and personal costs remain excluded under IRS Publication 970.
Students may review support schedule entries or student demographic information when confirming school records. Business tools, such as corporate tax software or trade compliance systems, do not affect eligibility. These items apply to business filings, not federal education tax credit rules.
To understand your options for paying tax debt over time and avoiding further penalties, refer to our IRS Payment Plans guide.
Step-by-Step (High Level)
Begin by gathering your Form 1098-T, receipts for education expenses, and records of scholarships or grants. Check any payments made through an off-campus bookstore or school payment options. Review all documents to confirm details before entering amounts.
- Review the 1098-T: The filer confirms the accuracy of the entries reported in Box 1 and Box 5.
- Identify qualified expenses: The filer excludes room and board, as well as other personal items that do not qualify.
- Verify enrollment: The filer confirms eligibility for academic periods and required clock hours or credits.
Complete Part III by entering student information and school details. Complete Parts I and II to calculate the American Opportunity Credit and the Lifetime Learning Credit—transfer results to Form 1040 and confirm information follows the Internal Revenue Service's instructions
For detailed explanations, filing instructions, and common questions about IRS tax forms, visit our IRS Form Help Center.
Common Mistakes and How to Avoid Them
Filing errors occur frequently on Form 8863 due to preventable mismatches and missing documentation. Identifying these issues at the preparation stage increases accuracy and supports a timely IRS review. Strong record alignment improves the likelihood of proper credit calculation.
- Mismatched Form 1098-T Entries: The filer aligns reported qualified expenses with institutional Form 1098-T data to maintain consistency across records.
- Incorrect Taxpayer Identification Numbers: The filer verifies all identification numbers so the IRS can validate student eligibility.
- Missing Required Attachments: The filer attaches Form 8862 when required after a prior disallowance to restore credit eligibility.
- Inaccurate Income Reporting: The filer confirms modified adjusted gross income entries to support correct phaseout calculations.
- Unreported Refund Adjustments: The filer accounts for tuition reimbursements or refunds that reduce qualified expenses during credit computation.
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 reviews Form 8863 with the rest of the filed return. Refundable credit amounts increase the final refund, and nonrefundable credits reduce the taxpayer’s remaining liability. Processing may take longer when the IRS verifies Form 1098-T entries, enrollment records, or reported scholarships or grants.
The IRS may request documents such as billing statements, payment records, or proof of qualified tuition and related expenses. Supporting files should be kept for reference, including 1098-T information and school communications. Prompt responses to IRS notices help prevent adjustments or removal of allowed credits.
Frequently Asked Questions
Can education credits be claimed when tuition is paid with student loan funds?
Loan proceeds count as payments toward qualified education expenses under the rules outlined in Publication 970. Schools document these charges through Student Accounts and related 1098-T information. Form 8863 calculations rely on the amounts paid during eligible academic periods.
What should a filer do when Form 1098-T shows incorrect entries in Box 1 or Box 5?
Incorrect reporting should be addressed with the Bursar’s Office or Financial Aid & Billing before filing IRS Form 8863. Institutions may update Box 3, Box 4, Box 6, Box 7, or Box 8 when needed. Using accurate, qualified tuition and related expenses helps ensure your education tax credits are calculated correctly.
Do federal education tax credits apply to secondary education programs?
Education credits apply only to higher education at a postsecondary educational institution. Secondary education and K-12 coursework do not qualify under IRS Publication 970 or the Taxpayer Relief Act of 1997. Eligible programs must meet enrollment and clock or credit hours criteria.
Can required course materials qualify when purchased from an off-campus bookstore?
Required materials count as qualified expenses for the American Opportunity Tax Credit when needed for coursework. These items may appear outside institutional payment options or an e-commerce site. Materials are allowed even when not purchased through on-campus student organizations or billing systems.
Does using the Free File Program affect eligibility for education credits?
Eligibility depends on qualified tuition and related expenses, scholarships or grants, and tax-free educational assistance. The Free File Program does not influence income limits or credit calculations. Form 8863 relies on accurate entries, including tuition and fees, as well as the amounts shown on IRS Form 1098-T.
