What Is IRS Form 8863?

If you paid tuition and other qualified education expenses for yourself, your spouse, or a dependent, Form 8863 is how you claim education tax credits on your return. The two main credits are the American Opportunity Credit and the Lifetime Learning Credit — and they work very differently.

The American Opportunity Credit

The American Opportunity Credit (AOC) is worth up to $2,500 per eligible student per year. It covers the first four years of post-secondary education at an eligible institution. The student must be enrolled at least half-time in a degree program. Up to 40% of the credit (up to $1,000) is refundable, meaning it can give you a refund even if you owe no tax. The credit phases out at higher income levels.

The Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is worth up to $2,000 per return (not per student). It covers tuition and fees at eligible institutions and has no limit on the number of years you can claim it — which makes it useful for graduate students, part-time students, and people taking classes for professional development. The LLC is not refundable and phases out at higher income levels.

What Expenses Qualify

Tuition and required fees qualify. Room, board, transportation, and books generally don't qualify for the credits (though books and required supplies do qualify for the AOC if required as a condition of enrollment). You'll receive a Form 1098-T from your school showing the amounts billed and paid.

Coordination Rules

You can only claim one credit per student per year. You also can't use the same expenses for both a tax credit and a tax-free distribution from a 529 plan. If you received scholarships or grants, those reduce the qualifying expenses before you calculate the credit.

Income Limits

Both credits phase out for higher-income taxpayers and are unavailable above certain thresholds. If your income is too high for education credits, look into whether the student loan interest deduction or other education tax benefits might still apply.