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student is not claimed as a dependent on another person’s tax

2011 (box 1) or amounts billed in 2011 (box 2). However, the

return, only the student can claim a credit.

amount in box 1 or 2 of Form 1098-T may be different from

what you actually paid. On Form 8863, lines 1 and 3, enter only

Generally, qualified education expenses paid on behalf of

the amounts you paid in 2011 for qualified expenses (reduced,

the student by someone other than the student (such as a

if necessary, by tax-free education assistance and refunds, as

relative) are treated as paid by the student. However, qualified

described later). See chapters 2 and 3 of Pub. 970 for more

education expenses paid (or treated as paid) by a student who

information on Form 1098-T.

is claimed as a dependent on your tax return are treated as

paid by you. Therefore, you are treated as having paid

If you or the student takes a deduction for higher education

expenses that were paid from your dependent student’s

expenses, such as on Schedule A or Schedule C (Form 1040),

earnings, gifts, inheritances, savings, etc. For more information

you cannot use those same expenses in your qualified

and an example, see Who Can Claim a Dependent’s Expenses

education expenses when figuring your education credits.

in Pub. 970, chapter 2 or 3.

Any qualified expenses used to figure the education

Who cannot claim a credit. You cannot take an education

credits cannot be taken into account in determining the

credit if any of the following apply.

amount of a distribution from a Coverdell ESA or a

CAUTION

qualified tuition program (section 529 plan) that is excluded

1. You are claimed as a dependent on another person’s tax

from gross income. See Pub. 970, chapters 7 and 8, for more

return, such as your parent’s return.

information.

2. Your filing status is married filing separately.

Prepaid Expenses

3. You (or your spouse) were a nonresident alien for any part

of 2011 and did not elect to be treated as a resident alien for

Qualified education expenses paid in 2011 for an academic

tax purposes.

period that begins in the first 3 months of 2012 can be used

4. Your modified adjusted gross income (MAGI) is one of the

only in figuring your 2011 education credits. For example, if you

following.

pay $2,000 in December 2011 for qualified tuition for the 2012

winter quarter that begins in January 2012, you can use that

a. American opportunity credit: $180,000 or more if married

$2,000 in figuring your 2011 education credits (if you meet all

filing jointly, or $90,000 or more if single, head of

the other requirements).

household, or qualifying widow(er).

b. Lifetime learning credit: $122,000 or more if married filing

You cannot use any amount paid in 2010 or 2012 to

jointly, or $61,000 or more if single, head of household,

figure your 2011 education credit(s).

or qualifying widow(er).

CAUTION

There are a number of factors, such as your filing status,

Tax-Free Educational Assistance and Refunds

your MAGI, and whether you are subject to the

TIP

of Qualified Education Expenses

alternative minimum tax, that will affect the amount of

Tax-free educational assistance includes a tax-free scholarship

any education credit you are eligible to claim. When you figure

or Pell grant or tax-free employer-provided educational

your taxes, you may want to compare the different education

assistance. See chapter 1 of Pub. 970 for specific information.

credits in order to choose the method(s) that gives you the

lowest tax liability. If you qualify, you may find that a

Adjusted qualified education expenses. For both credits,

combination of credits and other education benefits gives you

you must reduce the total of your qualified education expenses

the lowest tax. See Pub. 970 for information on other benefits.

by any tax-free educational assistance for the qualified

education expenses paid in 2011 and by any refunds of your

Qualified Education Expenses

qualified education expenses paid in 2011 if the refund or

tax-free assistance is received in 2011 or in 2012 before you file

Generally, qualified education expenses are amounts paid in

your 2011 tax return. This is the amount of your adjusted

2011 for tuition and fees required for the student’s enrollment or

qualified education expenses. Use the Qualified Education

attendance at an eligible educational institution. It does not

Expenses Worksheet for Part I, Line 1, Column (c) for the

matter whether the expenses were paid in cash, by check, by

American opportunity credit. Use the Qualified Education

credit or debit card, or with borrowed funds.

Expenses Worksheet for Part II, Line 3, Column (c) for the

Only certain expenses for course-related books, supplies,

lifetime learning credit.

and equipment qualify.

•

Credit recapture. If any tax-free educational assistance for

American opportunity credit: Qualified education expenses

the qualified education expenses paid in 2011 or any refund of

include amounts spent on books, supplies, and equipment

your qualified education expenses paid in 2011 is received after

needed for a course of study, whether or not the materials are

you file your return for the year in which the expenses were

purchased from the educational institution as a condition of

paid, you must recapture (repay) any excess credit. You do this

enrollment or attendance.

•

by figuring the amount by which your tax liability would have

Lifetime learning credit: Qualified education expenses include

increased if the refund or tax-free assistance had been received

only amounts for books, supplies, and equipment required to

in the year for which you claimed the education credit(s).

be paid to the institution as a condition of enrollment or

Include that amount as an additional tax for the year the refund

attendance.

or tax-free assistance was received.

Qualified education expenses for either credit do not include

Example. You paid $8,000 tuition and fees in December

amounts paid for:

•

2011 for your child’s spring semester beginning in January

Room and board, insurance, medical expenses (including

2012. You filed your 2011 tax return on February 2, 2012, and

student health fees), transportation, or other similar personal,

claimed a lifetime learning credit of $1,600 ($8,000 qualified

living, or family expenses.

•

expenses paid x .20). You claimed no other tax credits. After

Any course or other education involving sports, games, or

you filed your return, your child dropped two courses and you

hobbies, or any noncredit course, unless such course or other

received a refund of $1,400.

education is part of the student’s degree program or (for the

lifetime learning credit only) helps the student acquire or

You must refigure your 2011 lifetime learning credit using

improve job skills.

$6,600 ($8,000 qualified expenses - $1,400 refund). The

•

Nonacademic fees, such as student activity fees, athletic

refigured credit is $1,320 and your tax liability increased by

fees, insurance expenses, or other expenses unrelated to the

$280. You must include the difference of $280 ($1,600 credit

academic course of instruction.

originally claimed - $1,320 refigured credit) as additional tax on

You should receive Form 1098-T, Tuition Statement, from

your 2012 income tax return. See the instructions for your 2012

the college or university reporting either payments received in

income tax return to determine where to include this tax.

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Instructions for Form 8863 (2011)

Instructions For Form 8863 - Education Credits (American Opportunity And Lifetime Learning Credits) - 2011 Page 2

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