Tax Credits & Deductions

Form 8863: Education Credits (AOTC and Lifetime Learning)

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

Form 8863 is the IRS form you file with your Form 1040 to claim two education tax credits: the American Opportunity Tax Credit (AOTC), worth up to $2,500 per student, and the Lifetime Learning Credit (LLC), worth up to $2,000 per return. The AOTC is 40% refundable and limited to four tax years per student; the LLC is nonrefundable and available for unlimited years. You compute one or both on Form 8863, then carry the totals to Form 1040 and Schedule 3.

Both credits reduce tax dollar for dollar, which is more valuable than a deduction of the same size. You cannot claim both credits for the same student in the same year, and you generally cannot claim either without a Form 1098-T from the school. This guide compares the two credits, lays out the 2026 income phaseouts, and walks through how each form line works.

AOTC vs Lifetime Learning Credit: the comparison table

The AOTC pays more, is partly refundable, and can generate a check even when you owe no tax, but it applies only to the first four years of a degree program. The LLC covers a wider set of students (graduate courses, part-time study, single job-skill classes) but caps at $2,000 per return and never refunds below zero. Pick the AOTC when a student qualifies; fall back to the LLC when they do not.

Because one is per student and the other is per return, a family with two students in their first four years of college may claim the AOTC twice (up to $5,000 total), while the LLC stays at $2,000 no matter how many students are on the return.

Who can claim an education credit

You can claim an education credit if you, your spouse, or a dependent you claim paid qualified tuition and related expenses to an eligible postsecondary school, and your modified adjusted gross income is under the phaseout ceiling. The student must have a valid Social Security number or ITIN, and you cannot file as married filing separately.

Only one taxpayer may claim expenses for a given student in a year. If a parent claims the student as a dependent, the parent claims the credit even if the student paid the bills. If the student is not claimed as a dependent, the student claims the credit on their own return.

The school must be eligible to participate in a U.S. Department of Education student aid program, which covers most accredited public and nonprofit colleges and many for-profit and vocational schools. Qualified expenses are tuition and required fees, reduced by tax-free scholarships, grants, and employer assistance.

2026 MAGI phaseouts

For 2026, both credits phase out over the same modified adjusted gross income (MAGI) ranges: $80,000 to $90,000 for single, head of household, and qualifying surviving spouse filers, and $160,000 to $180,000 for married filing jointly. Above the top of the range, neither credit is available. These income thresholds are not indexed for inflation and have been fixed for years.

MAGI for education credits starts with adjusted gross income and adds back certain foreign earned income and housing exclusions. For most domestic filers, MAGI equals AGI, so the number on Form 1040 controls.

Inside the phaseout range, the credit is reduced proportionally. A single filer with MAGI of $85,000 sits halfway through the $80,000 to $90,000 band, so their credit is cut by roughly 50%. Married filing separately cannot claim either credit at any income level.

How to fill out Form 8863

Form 8863 has three parts. Part III (lines 27 to 31) is completed once per student to figure that student’s expenses and credit; Part I (lines 1 to 8) totals the refundable AOTC; Part II (lines 9 to 19) totals the nonrefundable credits. Complete a separate Part III for each student, then flow the results forward.

1. Part III, per student: Enter the student’s name and SSN, the school’s name, and its employer identification number (EIN) from Form 1098-T. Answer the AOTC eligibility questions (four-year, half-time, no felony drug conviction), then enter adjusted qualified expenses.
2. Part I (refundable AOTC): Carry the AOTC amounts from Part III to line 1, apply the MAGI phaseout on lines 2 through 7, and multiply by 40% on line 8. This is the refundable portion, up to $1,000 per student.
3. Part II (nonrefundable): Add the nonrefundable 60% of the AOTC and the full LLC, apply the LLC phaseout, and figure the total nonrefundable credit on line 19.
4. Transfer to Form 1040: The refundable AOTC from line 8 goes to Form 1040, line 29. The nonrefundable total from line 19 goes to Schedule 3, line 3, then onto Form 1040.

Starting with tax year 2026, you must provide both your Social Security number and the student’s Social Security number (when you are not the student) to claim either credit. Missing SSNs can cause the IRS to deny the credit.

The role of Form 1098-T

Form 1098-T, Tuition Statement, is the information return the school sends showing amounts billed or paid for tuition (Box 1) and scholarships or grants (Box 5). You generally must receive a 1098-T to claim either education credit, and you use its Box 1 figure, adjusted for tax-free aid, to compute qualified expenses.

Box 1 does not always equal what you can claim. You may need to reduce it by scholarships in Box 5, add required course materials the AOTC allows, or adjust for expenses paid in a different year. The school’s EIN on the 1098-T is required to claim the AOTC.

Limited exceptions let you claim a credit without a 1098-T, such as when a school is not required to issue one or fails to furnish it, provided you can substantiate the expenses. Keep receipts, billing statements, and payment records in case the IRS asks.

Coordinating with other education tax breaks

You cannot double-dip on the same dollar of expense. Expenses used for an education credit cannot also be used for a tax-free 529 plan distribution, the tuition-and-fees deduction (where still available), or a tax-free scholarship. Allocate each dollar to one benefit.

In many cases the AOTC delivers the largest benefit per dollar because of its 100% first-tier rate and partial refundability, so families often assign the first $4,000 of expenses to the AOTC and route remaining costs to a 529 withdrawal. The right split depends on income, tax liability, and how much aid is tax-free. Education credits appear alongside dozens of other incentives in our federal tax credits database, and both credits are claimed through Form 1040.

FAQ

Can I claim both the AOTC and the Lifetime Learning Credit?

Not for the same student in the same year. You may claim the AOTC for one student and the LLC for a different student on the same return, but each student gets only one credit per year. Form 8863 is built to figure both credits together while enforcing the one-credit-per-student rule through its per-student Part III worksheet.

Is the American Opportunity Credit refundable?

Yes, in part. Up to 40% of the AOTC, a maximum of $1,000 per student, is refundable, meaning you can receive it even if you owe no income tax. The other 60% is nonrefundable and can only reduce tax to zero. The Lifetime Learning Credit is entirely nonrefundable and cannot generate a refund on its own.

What is the income limit for education credits in 2026?

For 2026, both credits phase out between $80,000 and $90,000 of MAGI for single filers and between $160,000 and $180,000 for married filing jointly. Above $90,000 (single) or $180,000 (joint), neither credit is available. Married filing separately cannot claim either credit at any income level.

Do I need Form 1098-T to file Form 8863?

Generally yes. You use the school’s Form 1098-T to figure qualified expenses and, for the AOTC, to report the school’s EIN. Narrow exceptions apply when a school is not required to furnish a 1098-T or fails to provide one, but you must still be able to substantiate the expenses with your own payment records.

How many years can I claim the AOTC?

The American Opportunity Credit is limited to four tax years per eligible student, and only for students in the first four years of postsecondary education pursuing a degree. Once a student has claimed the AOTC in four tax years or completed four years of study, they may still qualify for the Lifetime Learning Credit, which has no year limit.

Which credit is better, AOTC or LLC?

For a student in their first four years of a degree program, the AOTC is usually better: it can be worth $2,500 per student, is 40% refundable, and counts course materials bought anywhere. The LLC caps at $2,000 per return, is nonrefundable, and requires materials be paid to the school, but it covers graduate students, part-timers, and single-course learners the AOTC excludes.

Can graduate students claim an education credit?

Graduate students generally cannot claim the AOTC because it is limited to the first four years of postsecondary education in a degree program. They can usually claim the Lifetime Learning Credit, which covers graduate coursework, professional degree programs, and courses taken to acquire or improve job skills, subject to the same 2026 MAGI phaseouts.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.

Related guides

• The American Opportunity Tax Credit (AOTC), Explained
• The Lifetime Learning Credit, Explained
• Form 1098-T Explained
• Form 1098-E