What IRS Form 8863 (2013) Is For
IRS Form 8863 (2013) is used to calculate and claim education tax credits that help reduce the cost of higher education for eligible students. The form supports both the American Opportunity Tax Credit and the Lifetime Learning Credit, allowing taxpayers to report qualified education expenses paid to an eligible educational institution during the tax year. It helps determine whether the taxpayer qualifies for refundable or nonrefundable credit amounts and ensures accurate reporting of tuition and related expenses for federal income tax purposes.
When You’d Use IRS Form 8863 (2013)
Taxpayers use IRS Form 8863 (2013) in several situations involving higher education expenses and the need to claim an education credit on a federal tax return.
- First-time claimants of education credits: Taxpayers use this form when they need to report qualified education expenses paid during the tax year and wish to claim the credit for an eligible student.
- Claiming the American Opportunity Tax Credit or Lifetime Learning Credit: Taxpayers complete the form when they qualify for one of the two education tax credits and must calculate the correct credit amount based on qualified tuition and related expenses.
- Reporting prepayments for an academic period beginning in the next year: Taxpayers file the form when they make early payments for an academic period beginning within the first three months of the following year and want to apply those amounts to the current tax year.
- Filing an amended tax return: Taxpayers use the form when correcting a previous tax return to claim an education credit that was omitted or miscalculated.
- Adjusting credits affected by tax-free educational assistance: Taxpayers complete this form when scholarships, grants, or employer assistance reduce their qualified expenses and a credit recalculation is required.
Key Rules or Details for the 2013 Tax Year
IRS Form 8863 (2013) adheres to several Internal Revenue Service rules that focus on income limits, student qualifications, and the proper calculation of education credits.
- Income limits based on modified adjusted gross income: Taxpayers must confirm whether their modified adjusted gross income falls within the income phaseout ranges that apply to single filers and joint filers for the 2013 tax year.
- Restrictions for married filing separately: Taxpayers with a married filing separately status are not eligible to claim an education credit under the current tax year's rules.
- Eligibility rules for each eligible student: The student must attend an eligible educational institution and pursue a program leading to a recognized education credential during an academic period covered by the tax year.
- Limits on using the credit for the same student: Taxpayers may not claim both of the two education credits for the same student in one tax year, and the American Opportunity Credit cannot be used for more than a maximum of four years.
- Requirements about felony drug conviction: A student who has a felony drug conviction as of the end of the tax year is not eligible for the American Opportunity Credit.
- Rules for Qualified Educational Expenses: Taxpayers must calculate the credit using only qualified education expenses and exclude living expenses or personal costs that do not meet the Internal Revenue Service's standards.
Step-by-Step (High Level)
Completing IRS Form 8863 (2013) requires organized documentation and careful entry of information to determine the correct education credit for the tax year.
- Gather the tuition statement and payment records: Taxpayers collect Form 1098, receipts, and financial aid documents to verify all qualified education expenses paid to an eligible educational institution.
- Complete student information in Part III: Taxpayers enter each student’s name, taxpayer identification number, or adoption taxpayer identification number, and the details of the educational institution the student attended.
- Calculate qualified expenses for each student: Taxpayers determine qualified expenses by subtracting tax-free educational assistance from qualified tuition and related costs to ensure the correct amount is used for credit calculations.
- Figure the American Opportunity Credit or Lifetime Learning Credit: Taxpayers use the worksheets and instructions to calculate the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) based on the academic periods and qualified educational expenses paid.
- Enter refundable and nonrefundable amounts: Taxpayers compute the refundable portion when eligible and apply nonrefundable credits to reduce the tax owed on their federal income tax return.
- Transfer the education credit to the tax return: Taxpayers carry the final credit amount to the appropriate line of their federal income tax form so they can accurately report the education credit and receive the correct tax benefits.
Common Mistakes and How to Avoid Them
Taxpayers often make avoidable errors when preparing IRS Form 8863 (2013), and these issues can be prevented by applying the correct rules for education credits.
- Claiming both education credits for the same student: Taxpayers avoid this mistake by selecting only one credit for each eligible student, as both education tax credits cannot be claimed for the same student in the same tax year.
- Including nonqualified expenses in calculations: Taxpayers prevent miscalculations by using only qualified education expenses and excluding personal or living expenses that do not qualify under Internal Revenue Service standards.
- Incorrectly entering school information: Taxpayers avoid delays by verifying the educational institution’s federal identification number, address, and eligibility before completing the form.
- Overlooking income limits: Taxpayers avoid denied credits by checking whether their modified adjusted gross income falls within the required income ranges before beginning the calculation.
- Ignoring the four-year limit for the American Opportunity Credit: Taxpayers avoid errors by confirming that the student has not already claimed the credit for the maximum of four years allowed by law.
What Happens After You File
After taxpayers file IRS Form 8863 (2013), the Internal Revenue Service reviews the education credits and matches the information with Form 1098 data submitted by eligible educational institutions. The IRS may issue a notice requesting verification of qualified expenses or enrollment details, especially if numbers on the tuition statement do not match the amounts reported. Refunds that include a refundable portion of the American Opportunity Credit typically follow standard IRS timelines, while errors or inconsistencies may delay processing.
FAQs
Can I claim an education credit if I pay tuition with student loans?
Yes, you can claim education credits when tuition is paid with student loan funds because the Internal Revenue Service treats loan disbursements as payments made by the taxpayer. The credit is based on qualified education expenses paid during the tax year.
Can I use IRS Form 8863 (2013) if the school did not issue a Form 1098?
Yes, taxpayers may still claim the credit as long as they can show the student attended an eligible educational institution and provide documentation of qualified expenses. Tuition bills, receipts, and enrollment records must support the claim.
How does tax-free educational assistance affect qualified expenses?
Taxpayers must subtract scholarships, grants, and employer assistance from qualified education expenses before calculating the credit. This prevents overstating costs and ensures the correct credit amount is applied.
What if my modified adjusted gross income is above the phaseout range?
If income exceeds the phaseout limits, the credit is reduced or eliminated depending on filing status and the adjusted gross income amount. Taxpayers must review the 2013 thresholds to confirm eligibility.
