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)