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Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. See Adjusted Qualified Education Expenses, later. Who can claim a dependent's expenses. If a student is claimed as a dependent on another person's tax return, all qualified education expenses of the student are treated as having been paid by that person. Therefore, only that person can claim an education credit for the student. If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Expenses paid by a third party. Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you are treated as having paid expenses that were paid by the third party. For more information and an example, see Who Can Claim a Dependent's Expenses in Pub. 970, chapter 2 or 3. Who cannot claim a credit. You cannot take an education credit if any of the following apply. 1. You are claimed as a dependent on another person's tax return, such as your parent's return. 2. Your filing status is married filing separately. 3. You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. 4. Your modified adjusted gross income (MAGI) is: a. For the American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er) with dependent child. b. For the lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) with dependent child. Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. However, if you are filing Form 2555, Form 2555-EZ, or Form 4563, or are excluding income from Puerto Rico, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. For details, see Pub. 970. American Opportunity Credit You may be able to take a credit of up to $2,500 for adjusted qualified education expenses (defined later) paid for each student who qualifies for the American opportunity credit. This credit equals 100% of the first $2,000 and 25% of the next $2,000 of adjusted qualified expenses paid for each eligible student. The amount of your credit for 2013 is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You cannot claim a credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). If you can claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or for the lifetime learning credit. If you have this choice, the American opportunity credit will always be greater than the lifetime learning credit. CAUTION ! TIP Student qualifications. Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. 1. As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. 2. Neither the American opportunity credit nor the Hope Scholarship credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. If the American opportunity credit (and Hope scholarship credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. Example 1. Sharon was eligible for the Hope scholarship credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Her parents claimed the Hope scholarship credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Sharon claimed the American opportunity credit on her 2012 tax return. The American opportunity credit and Hope scholarship credit have been claimed for Sharon for four tax years before 2013. Therefore, the American opportunity credit cannot be claimed for Sharon for 2013. If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. Example 2. Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. No one claimed an American opportunity credit or Hope scholarship credit for Wilbert for any other tax year. The American opportunity credit and Hope scholarship credit have been claimed for Wilbert for only three tax years before 2013. Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. 3. For at least one academic period beginning (or treated as beginning) in 2013, the student both: a. Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and b. Carried at least one-half the normal full-time workload for his or her course of study. The standard for what is half of the normal full-time work load is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965. For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. See Prepaid Expenses, later. Example. Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Glenda pays her tuition for the 2014 Spring semester in December 2013. Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. Therefore, Glenda satisfies this third requirement. -2- Instructions for Form 8863 (2013)