Form 8863 (2023): Education Credits Checklist
Overview
Form 8863 allows taxpayers to claim education tax credits for qualified expenses paid during the 2023 tax year. Two credits are available: the American Opportunity Credit offers up to $2,500 per eligible student with 40% potentially refundable, while the Lifetime Learning Credit provides up to $2,000 per tax return as a nonrefundable credit.
You must provide the educational institution's employer identification number on line 22, column (a), item (4) or column (b), item (4) in specific circumstances. The EIN requirement applies when you claim the American Opportunity Credit, when the student received Form 1098-T for 2023, or when the student received Form 1098-T for 2022 with box 7 checked.
Student Eligibility Requirements
Verify that each student meets all qualification criteria before claiming the American Opportunity Credit. The student must not have completed the first four years of postsecondary education before 2023, as determined by the eligible educational institution.
The credit cannot be claimed if it has already been claimed for that student for any four tax years before 2023. Students must have been enrolled at least half-time for at least one academic period that began or is treated as having begun in 2023 in a program leading to a postsecondary degree, certificate, or recognized credential.
Age and Refundability Restrictions
If you were under age 24 at the end of 2023 and all three conditions apply to you, you cannot claim any part of the American Opportunity Credit as a refundable credit on your tax return.
Condition one has three parts: you were either under age 18, or age 18 with earned income less than one-half of your support, or over age 18 and under age 24 as a full-time student with earned income less than one-half of your support.
You must also meet condition two (at least one of your parents was alive at the end of 2023) and condition three (you are not filing a joint return for 2023). When these conditions apply, check the box next to line 7, skip line 8, and enter the amount from line 7 on line 9 as a nonrefundable credit only.
Additional Student Qualifications
- As of the end of 2023, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance.
- Both filers and students must have been issued a taxpayer identification number by the due date of the 2023 return (including extensions).
- The student must have received Form 1098-T from the educational institution for 2023, or you must have followed the procedures outlined in the instructions under the Form 1098-T requirement.
- You must provide the educational institution's employer identification number on your Form 8863.
Qualified Education Expenses
For the American Opportunity Credit, qualified education expenses include amounts paid for tuition, fees, and course materials. Course materials include books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.
For the Lifetime Learning Credit, qualified education expenses include amounts paid for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. You must reduce qualified education expenses by tax-free educational assistance, including scholarships, fellowships, Pell grants, veterans' educational assistance, and employer-provided educational assistance.
Calculating the American Opportunity Credit
Phase-Out Calculation (Lines 1–7)
- Enter the total of all amounts from all Parts III, line 30, on Part I, line 1.
- Enter $180,000 if married filing jointly or $90,000 if single, head of household, or qualifying surviving spouse on line 2.
- Enter your modified adjusted gross income on line 3.
- Subtract line 3 from line 2 and enter the result on line 4.
- Enter $20,000 if married filing jointly or $10,000 if single, head of household, or qualifying surviving spouse on line 5.
- Calculate the phase-out factor on line 6 by dividing line 4 by line 5 (enter 1.000 if line 4 equals or exceeds line 5).
- Multiply line 1 by line 6 and enter the result on line 7.
Refundable Portion (Line 8)
The credit phases out when your modified adjusted gross income falls between $80,000 and $90,000 ($160,000 and $180,000 if married filing jointly). You calculate the refundable portion on line 8 by multiplying line 7 by 40% (0.40) and entering this amount on Form 1040 or 1040-SR, line 29.
Calculating the Lifetime Learning Credit
Expense Limits and Credit Calculation (Lines 10–12)
After completing Part III for each student, enter the total of all amounts from all Parts III, line 31, on Part II, line 10. Enter the smaller of line 10 or $10,000 on line 11. Multiply line 11 by 20% (0.20) on line 12 to calculate your tentative Lifetime Learning Credit.
Phase-Out Application (Lines 13–18)
The same phase-out thresholds and calculations apply to the Lifetime Learning Credit as the American Opportunity Credit. Enter your modified adjusted gross income on line 14 and complete the phase-out calculation through line 17. Multiply line 12 by line 17 and enter the result on line 18. Enter this amount on line 1 of the Credit Limit Worksheet.
Completing Part III for Each Student
Complete a separate Part III on page 2 for each individual for whom you claim either credit before completing Parts I and II. Enter adjusted qualified education expenses on line 27 for the American Opportunity Credit (maximum $4,000) or line 31 for the Lifetime Learning Credit. You cannot claim both credits for the same student in the same year.
Enter the institution's employer identification number on line 22, item (4) when required. Answer all questions on lines 23 through 26 to determine the American Opportunity Credit eligibility before completing lines 27 through 30.
Applying the Credit Limit Worksheet
Enter the nonrefundable American Opportunity Credit from line 9 on line 2 of the Credit Limit Worksheet. Enter the Lifetime Learning Credit from line 18 on line 1 of the Credit Limit Worksheet. Complete the worksheet to determine your allowable nonrefundable education credits. Enter the amount from line 7 of the Credit Limit Worksheet on line 19 and on Schedule 3 (Form 1040), line 3.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
