Instructions for Form 8863 Checklist: Tax Year 2013
The American Taxpayer Relief Act of 2012 extended the American Opportunity Credit for five years through 2017, making 2013 the first full tax year under this extension with inflation-adjusted income phase-out thresholds. Form 8863 allows eligible taxpayers to claim education tax credits for qualified tuition and related expenses paid to eligible educational institutions during the tax year.
Eligibility Requirements for the American Opportunity
Credit
You may claim the American Opportunity Credit for tax year 2013 only when the student satisfies four specific eligibility rules. Enrollment must have been at least half-time in a degree program or other recognized credential during one or more academic periods that began in
2013.
By the end of 2013, the student must not have been convicted of a federal or state felony involving the possession or distribution of a controlled substance. Eligibility also requires that the student had not completed the first four years of postsecondary education as of the start of
2013. In addition, the American Opportunity Credit or the Hope Scholarship Credit cannot have been claimed for the same student for more than four tax years before 2013.
Income Phase-Out Thresholds for 2013
Eligibility for education credits in 2013 depends on your modified adjusted gross income, with separate phase-out ranges applied to each credit. For the American Opportunity Credit, a partial reduction applies to single filers with MAGI between $80,000 and $90,000, while married couples filing jointly see a reduction when income falls between $160,000 and $180,000.
Different limits apply to the lifetime learning credit, which phases out for single filers with MAGI between $53,000 and $63,000 and for married filing jointly filers with MAGI between $107,000 and $127,000. Once income exceeds the upper threshold for a given filing status, neither credit may be claimed.
Calculating the American Opportunity Credit Amount
The American Opportunity Credit equals 100% of the first $2,000 of qualified education expenses plus 25% of the next $2,000 of qualified expenses, creating a maximum credit of
$2,500 per eligible student. Qualified education expenses for this credit include tuition and required enrollment fees paid in 2013 for academic periods beginning in 2013 or the first three months of 2014. The credit also covers required books, supplies, and equipment needed for enrollment or attendance, whether or not you purchased these materials from the educational institution. Room and board expenses do not qualify as eligible education expenses under IRS rules.
Understanding the Lifetime Learning Credit for 2013
Unlike the American Opportunity Credit, the Lifetime Learning Credit follows a different benefit structure, allowing a claim equal to 20% of qualified education expenses, up to $10,000 per tax return. This formula results in a maximum credit of $2,000 per return, regardless of the number of students enrolled at eligible institutions.
Claiming both education credits for the same student in the same tax year is not permitted. No half-time enrollment requirement applies to the lifetime learning credit, and eligible courses include those designed to acquire or improve job skills, thereby extending the credit's availability to graduate-level education and professional development.
Required Documentation and Form 1098-T
Educational institutions must provide Form 1098-T, which reports either payments received or amounts billed for qualified tuition and related expenses during 2013. The quantities shown in
Box 1 or Box 2 of Form 1098-T may differ from what you actually paid during the tax year.
You must use only the amounts you actually paid in 2013 when completing Form 8863, reduced by any scholarships, grants, or other tax-free educational assistance. If you did not receive
Form 1098-T from the institution, you must obtain billing statements or official documentation
showing the qualified expenses you paid during 2013.
Adjusting Expenses for Scholarships and Tax-Free
Assistance
You must reduce qualified education expenses by the amount of nontaxable scholarships or grants the student received in 2013 that were allocated to qualified expenses.
Employer-provided education assistance up to $5,250 annually under Section 127 must also be excluded from qualified expenses reported on Form 8863.
If scholarship amounts exceed qualified expenses, the excess does not create a deductible loss or increase your credit. Tax-free educational assistance includes Pell grants, the tax-free portion of fellowships, veterans' educational assistance, and any other educational assistance excludable from gross income.
Refundability Rules for the American Opportunity Credit
Partial refundability applies to the American Opportunity Credit, allowing up to 40% of the credit, capped at $1,000, to be refunded when the credit exceeds your tax liability. Access to the refundable portion depends on specific conditions tied to age, student status, and support arrangements as of the end of 2013.
Additional limitations apply to taxpayers who were under age 24 at the close of 2013, particularly when earned income is low or when parents provided more than half of their financial support. A seven-question worksheet included in the 2013 Form 8863 instructions is used to determine whether younger taxpayers qualify for the refundable amount.
Filing Requirements and Deadlines
You must attach Form 8863 to your Form 1040, Form 1040A, or Form 1040NR when filing your
2013 tax return. The form must be present when you submit your return to claim either the education credit during IRS processing.
Paper returns must be received or postmarked by April 15, 2014, unless you file for an extension. Enter the student's name and Social Security number exactly as shown on page 1 of your tax return, and complete a separate Part III for each student for whom you claim either credit, before completing Parts I and II.
Key Regulatory Updates for Tax Year 2013
The 2013 form structure includes revised worksheets that prevent you from claiming both the
American Opportunity Credit and the Lifetime Learning Credit for the same student in the same tax year. Income phase-out thresholds increased from 2012 levels due to inflation indexing, with the American Opportunity Credit using $80,000–$90,000 for single filers and
$160,000–$180,000 for married filing jointly.
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