What Form 8863 (2020) Is For
Form 8863 (2020) reports education credits to the Internal Revenue Service when you pay qualified education expenses for higher education during 2020. It calculates the American Opportunity Tax Credit and the Lifetime Learning Credit using tuition and fees, student activity fees, qualified tuition, and other qualified higher education expenses listed in Publication 970. These credits help reduce your tax liability when you pursue postsecondary education.
The form applies to undergraduate and secondary education programs that meet IRS rules for 2020. It supports traditional returns and electronic tax filing when financial aid, such as a Pell Grant or tax-free educational assistance, appears in Box 5. The information reported must match IRS Form 1098-T.
When You’d Use Form 8863 (2020)
You use Form 8863 when a 2020 tax return includes qualified education expenses such as tuition and fees, course materials, or enrollment costs for eligible academic periods. Taxpayers may use this form when pursuing a graduate degree, clock or credit hours, or other programs offered by an educational institution listed under IRS Publication 970. You may also use the form when education savings accounts, such as a Coverdell Education Savings Account, help pay qualified expenses.
The form accompanies federal tax returns filed electronically or by sending a PDF file through snail mail. It also supports state income tax filings when those states follow federal education credit rules for 2020. Amended filings due to late filing penalties, tax penalties, or corrections involving education credits must include this form to complete the tax determination.
To understand your options for paying tax debt over time and avoiding further penalties, refer to our IRS Payment Plans guide.
Key Rules or Details for 2020
For the 2020 tax year, the American Opportunity Tax Credit applies only to students in their first four years of postsecondary education. Taxpayers must use Box 1 and Box 5 amounts from IRS Form 1098-T and reduce qualified expenses by tax-free educational assistance. Publication 970 confirms that room and board, transportation, medical expenses, and similar costs are not qualified higher education expenses.
The Lifetime Learning Credit supports a wide range of academic programs and applies to many higher education activities. Taxpayers may use it for job skill improvement, single courses, or enrollment that does not lead to a degree. The Lifetime Learning Tax Credit applies to qualified education expenses associated with courses required for a degree or other recognized educational credential.
Both credits require accurate income reporting and correct modified adjusted gross income calculations. These figures affect tax refunds, education credits, and traditional returns. Taxpayers must include information from forms such as Form W-2, Form 1099-MISC, Form 1099-NEC, Form 1099-DIV, Form 1099-INT, or Form SSA-1099 when determining eligibility.
Step-by-Step (High Level)
Start by collecting IRS Form 1098-T, receipts, and records showing tuition and fees or other qualified education expenses paid for 2020, then review whether Tax-free educational assistance or Pell Grant amounts must reduce those figures under Publication 970. Complete Form 8863 by following these steps:
- The filer enters student information and academic periods along with educational institution details in a complete and verified format.
- The filer records Box 1 and Box 5 amounts and adjusts qualified expenses according to the listed figures and applicable Tax-free educational assistance.
- The filer confirms eligibility for the American Opportunity Credit or the Lifetime Learning Credit by reviewing enrollment status, academic periods, and qualified higher education expenses as outlined in Publication 970.
- The filer applies income limits and calculates refundable or nonrefundable amounts using modified adjusted gross income and the Internal Revenue Service instructions.
- The filer transfers the final figures to federal tax forms and reviews them for accuracy to maintain consistent reporting across all documents.
Common Mistakes and How to Avoid Them
Many taxpayers experience delays due to recurring errors found in IRS submissions. Identifying these issues enhances filing accuracy and promotes consistent compliance across all required forms. Addressing these problems at the outset improves processing outcomes.
- Unsigned Returns: IRS submissions frequently arrive without the taxpayer's or preparer's signature. To ensure acceptance, the filer must sign every designated line before submitting the document.
- Mismatched Identification Numbers: Returns often contain EIN or SSN entries that do not match official records. The filer confirms each number against government-issued documents to ensure proper validation.
- Missing Required Schedules: Filers sometimes omit schedules referenced on the main form, and to maintain completeness, they attach all documents listed in the instructions.
- Incorrect Payment Remittance: Payments are occasionally transmitted using unapproved methods or after the posted deadline. To prevent processing issues, filers should remit funds through IRS-accepted channels in a timely manner.
For comprehensive support with IRS form instructions, deadlines, and filing options, see our IRS Form Help Center.
What Happens After You File
After filing Form 8863 with your 2020 tax return, the Internal Revenue Service reviews the information and determines eligibility for education credits. Refundable amounts from the American Opportunity Credit may increase your tax refund, while nonrefundable credits reduce your overall tax liability. Filing by snail mail may extend processing times compared with electronic tax filing.
The IRS may request clarification if the income records, qualified education expenses, or Box 1 and Box 5 figures differ from those reported by the institution. Supplying documents such as Form 1098-T or payment records helps resolve these checks efficiently. Verification may also include enrollment confirmation or reviews of qualified higher education expense calculations.
Frequently Asked Questions
Eligibility for the American Opportunity Tax Credit
Students may claim the American Opportunity Tax Credit only during their first four years of postsecondary education. The Internal Revenue Service requires enrollment at an eligible educational institution and verification of qualified education expenses, such as tuition, fees, or student activity fees, as reported on IRS Form 1098-T—the amounts in Box 1 and Box 5 support accurate income tax filing.
Claiming Credits Without IRS Form 1098-T
Taxpayers may file Form 8863 without IRS Form 1098-T when enrollment and qualified expenses can be proven through receipts, statements, or payment records. The Internal Revenue Service may request supporting documents, including evidence of qualified tuition or materials purchased from an off-campus bookstore. Publication 970 explains how academic periods still qualify when documentation is complete.
Lifetime Learning Credit for Graduate Programs
Graduate students may claim the Lifetime Learning Credit when tuition and fees are paid for eligible coursework. This credit applies to postsecondary education that includes clock or credit hours, skills improvement, and non-degree programs. Taxpayers must carefully calculate qualified expenses and follow the guidelines in IRS Publication 970 to determine credit eligibility.
Reporting Scholarships and Tax-Free Educational Assistance
Pell Grant amounts and other tax-free educational assistance must be used to reduce qualified expenses before claiming education credits. Taxpayers should review Box 5 on IRS Form 1098-T to confirm the correct adjustment for qualified higher education expenses. Accurate reporting helps prevent discrepancies during tax determination and supports proper tax refund calculations.
Using Education Savings Accounts for Qualified Expenses
Expenses paid with a Coverdell Education Savings Account may qualify when used for eligible higher education costs. Taxpayers must track distributions and coordinate them with tuition and fees, as well as support schedule documents or traditional tax returns, to avoid double-counting. IRS Publication 970 explains how to apply these amounts on federal tax forms correctly.
