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2013 Instructions for Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue Code unless otherwise noted. General Instructions Future Developments For the latest information about developments related to Form 8863 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/form8863. Purpose of Form Use Form 8863 to figure and claim your education credits, which are based on qualified education expenses paid to an eligible postsecondary educational institution. For 2013, there are two education credits. The American opportunity credit, part of which may be refundable. The lifetime learning credit, which is nonrefundable. A refundable credit can give you a refund for any part of the credit that is more than your total tax. A nonrefundable credit can reduce your tax, but any excess is not refunded to you. Both of these credits have different rules that can affect your eligibility to claim a specific credit. These differences are shown in Table 1 below. You may be able to take the tuition and fees deduction for you, your spouse, or a dependent, instead of an education credit. Figure your tax both ways and choose the one that gives you the lower tax. See Form 8917, Tuition and Fees Deduction, and chapter 6 of Pub. 970, Tax Benefits for Education, for more information about the tuition and fees deduction. Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. The credits are based on the amount of adjusted qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014. Academic period. An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. If an eligible educational institution uses credit hours or clock hours and does not have academic terms, each payment period may be treated as an academic period. For details, see Academic period in chapters 2 and 3 of Pub. 970. TIP Comparison of Education Credits Caution. You can claim both the American opportunity credit and the lifetime learning credit on the same return-but not for the same student. American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly; $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the year Available for one or more courses Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and required enrollment fees (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Table 1. Nov 27, 2013 Cat. No. 53002G