What Is the IRS Form 8863?
Looking to claim education credits? Form 8863 is key for claiming the American Opportunity and Lifetime Learning credits. Learn how to properly complete Form 8863, what eligibility criteria you need to meet, and how it can help reduce your tax burden. Our guide breaks down everything you need to know.
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
Key Takeaways
- The American Opportunity Credit can reduce your tax liability by up to $2,500 per student for qualified educational expenses incurred during the first four years of post-secondary schooling.
- Qualifying educational expenses include the amount you pay for tuition, fees, books, and supplies required for the coursework.
- The Lifetime Learning Credit offsets up to $2,000 per tax return for the cost of enrollment in a post-secondary school.
- The cost of books and other supplies are not covered by the Lifetime Learning Credit unless the school requires their purchase as a condition of enrollment, and you pay the school directly for these items.
Claiming the American Opportunity credit
The American Opportunity credit can reduce your tax liability by up to a $2,500 per student for educational expenses you or a dependent student incur during the first four years of post-secondary schooling. The credit generally equals 100% of the first $2,000 in expenses, plus 25% of any excess over that amount – but it can't be more than the $2,500 maximum (and it can be lower if your income is above a certain amount).
The credit is calculated based on the amount you pay for tuition, fees, books and supplies required for the coursework. The credit is only available to students who enroll at least half-time for one or more academic semesters during the tax year and are pursuing a degree or other recognized credential. To claim the credit, your Modified Adjusted Gross Income (MAGI) must be below $90,000 if filing individually, or $180,000 if married filing jointly.
Claiming the Lifetime Learning credit
The Lifetime Learning credit can reduce your tax liability by up to $2,000 per tax return for the cost of enrollment in a post-secondary school. The expense of books and other supplies are not covered by this credit unless the school requires it as a condition of enrollment, and you pay the school directly for these items.
This credit provides more flexibility, as it only requires the student be enrolled in at least one course during the tax year. The course need not be part of a degree program; taking just one course to enhance job skills qualifies you to claim the credit.
To calculate the Lifetime Learning credit, you simply multiply your eligible expenses, up to $10,000, by 20%. However, as with the American Opportunity credit, it's reduced if your income is above a certain amount. As a result, the credit is only available to taxpayers with a MAGI below $90,000 if filing individually, or $180,000 if married filing jointly.
TurboTax Tip:
Complete Form 8863 and attach it to your tax return to claim the American Opportunity Credit or the Lifetime Learning Credit.
Calculating your MAGI
MAGI is based on your Adjusted Gross Income (AGI). Your AGI is essentially all gross income minus certain deductions such as moving expenses, IRA and health savings account contributions, alimony payments, student loan interest and educator expenses. For most taxpayers, MAGI is equal to the AGI you calculate on the first page of Form 1040. However, taxpayers who live and work abroad must increase AGI by the amount of foreign earned income and housing they exclude from taxable income to arrive at MAGI.
Preparing Form 8863
If you are eligible for either of the educational credits, the two-page Form 8863 can be completed with minimal time and effort to calculate both the American Opportunity credit and the Lifetime Learning credit.
In addition to using Form 8863 to determine the amount of each credit, the form is used to provide the IRS with information about the student and the school they attend.
Starting with the 2026 tax year, you also have to provide both your Social Security number and the student's Social Security number (if you're not the student) to claim the American Opportunity credit and/or the Lifetime Learning credit. The Social Security numbers must be valid for employment in the U.S. and issued before your tax return is due. (Before 2026, only the student's Social Security number or individual taxpayer identification number (ITIN) was required.)
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