What is Form 8863?
Form 8863 computes two education credits. The American Opportunity Tax Credit (AOTC) provides up to $2,500 per student (100% of first $2,000 + 25% of next $2,000), with 60% non-refundable and 40% refundable (up to $1,000). It requires at least half-time enrollment in the first four years of post-secondary education. The Lifetime Learning Credit (LLC) provides up to $2,000 (20% of up to $10,000 in expenses) and is entirely non-refundable. Both phase out at $80K-$90K Single / $160K-$180K MFJ.
SupportedKey Lines
| Line | Description | Destination |
|---|---|---|
| Part I Line 1 | AOTC per student (max $2,500) | Split refundable/non-refundable |
| Part III | LLC (max $2,000) | Non-refundable only |
| Line 19 | Non-refundable education credit | Schedule 3 Line 3 |
| Line 29 | Refundable AOTC (40%) | Form 1040 Line 29 |
How PaisaTax Handles It
- Computed from 1098-T qualified tuition and related expenses
- Phase-out applied based on modified AGI and filing status
- AOTC gated by Form 8862 when a prior-year disallowance exists
- Mutually exclusive per student — each student uses AOTC or LLC, not both
Common Situations
- Undergraduate student (AOTC): $4,000 in tuition yields full $2,500 credit — $1,500 non-refundable, $1,000 refundable.
- Graduate student (LLC): Only LLC is available. $10,000 in expenses yields $2,000 non-refundable credit.
- Income phase-out: Single filer at $85K gets 50% of the computed credit.