Form 8863 (Education Credits) — 2018 Tax Year
Corrected Checklist
This checklist explains how to complete Form 8863 for tax year 2018 to claim education credits, including the American Opportunity Credit and the Lifetime Learning Credit, under federal law. It follows the 2018 Form 8863 structure and IRS Publication 970 guidance to reduce standard eligibility, expense, and reporting errors on a 2018 tax return.
Form 8863 is filed with Form 1040 or Form 1040NR to claim a federal education tax credit based on qualified education expenses paid to an eligible educational institution during the 2018 tax year.
Step-By-Step Checklist for Completing Form 8863
Step 1: Confirm who may claim the education credit
Confirm whether the taxpayer or the student is eligible to claim the education tax credit based on dependency status shown on the 2018 Form 1040. When a student is claimed as a dependent, only the taxpayer who claims the student may claim Form 8863.
Also, confirm the filer is not claimed as a dependent on another return and is not using married filing separately status. Either condition disqualifies a taxpayer from eligibility for the American
Opportunity Credit and the Lifetime Learning Credit.
Step 2: Verify student identification requirements
Ensure each student listed on Form 8863 has a valid taxpayer identification number for tax year
2018, typically a Social Security Number issued by the Internal Revenue Service. The student's name and number must match IRS records exactly.
Confirm the student identification matches Form 1098-T and the tax return, because mismatches commonly delay processing or trigger correspondence. Corrections after filing may require an amendment process to restore education credits.
Step 3: Confirm the school qualifies as an eligible institution
Verify the school attended qualifies as an eligible educational institution for federal education tax credit purposes, meaning it participates in a U.S. Department of Education student aid program.
Postsecondary educational institutions generally qualify regardless of instruction format.
Do not rely on assumptions about online programs or non-degree coursework. Instead, confirm eligibility using the institution’s reporting on Form 1098-T or by checking federal student aid participation listings referenced in IRS Publication 970.
Step 4: Gather required records and student account data
Collect Form 1098-T, student account statements, and receipts showing qualified tuition and related expenses actually paid during tax year 2018. Also, gather records of financial aid, scholarships, and grants applied to those expenses.
Confirm the school’s employer identification number is available when required by Form 8863 instructions. Accurate documentation supports education tax credit calculations and protects the taxpayer during Internal Revenue Service review or examination.
Step 5: Determine which education credit applies
Find out if the American Opportunity Credit or the Lifetime Learning Credit applies to each eligible student. Keep in mind that only one education credit can be claimed per student per tax year. Different students on the same return may qualify for other credits.
Confirm the eligibility requirements for the American Opportunity Credit, including enrollment at least half-time, pursuit of a credential, and limits on prior usage. Use the lifetime learning credit for broader coursework when AOTC requirements are not met.
Step 6: Identify qualified education expenses
Identify qualified education expenses based on the specific credit being claimed. For the
American Opportunity Credit, qualified expenses include tuition, required fees, and course materials for postsecondary coursework in 2018.
For the lifetime learning credit, qualified expenses generally include tuition and mandatory enrollment fees. Follow Form 8863 instructions carefully, because expense definitions differ and directly affect the allowable education tax credit.
Step 7: Apply the special timing rule for payments
Apply the education credit timing rule, allowing qualified education expenses paid in 2018 for academic periods beginning in the first three months of 2019. This rule commonly applies to spring semester tuition paid in December.
Confirm payment dates using student account records rather than billing dates. Expenses must be paid in 2018 to qualify, even if coursework begins in early 2019.
Step 8: Reduce expenses for tax-free assistance
Reduce qualified education expenses by tax-free educational assistance, including scholarships and grants excluded from income under federal law. Only adjusted qualified education expenses may be used to compute Form 8863 credits.
Confirm whether financial aid was applied directly to qualified expenses or to other costs.
Misallocating tax-free assistance is a standard error that can overstate the education tax credit and require later correction.
Step 9: Compute MAGI and apply 2018 phaseouts
Compute modified adjusted gross income using the 2018 Form 8863 instructions, not general
AGI rules. MAGI determines whether education credits are fully allowed, partially reduced, or completely disallowed.
Apply the correct 2018 phaseout ranges separately to the American Opportunity Credit and the
Lifetime Learning Credit. Use the provided worksheet, as phaseout widths differ by filing status and credit type.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Complete Form 8863 and transfer amounts
Complete Form 8863 in the required order, including separate student sections and final credit calculations. Distinguish refundable and nonrefundable portions, because only the American opportunity credit includes a refundable component.
Transfer nonrefundable education credits to Schedule 3 of the 2018 Form 1040 and report any refundable AOTC portion on the primary return. Retain supporting records, but do not attach
Form 1098-T or receipts.
Recordkeeping and filing reminders
Retain Form 1098-T, payment receipts, scholarship documentation, and student account statements supporting the education credit claimed for tax year 2018. These documents are not filed but may be requested by the Internal Revenue Service.
Form 8863 must be attached to the original or amended 2018 tax return. Accurate records help ensure education credits remain allowed if questions arise after filing.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
