Form 8863 is where the American opportunity credit and the lifetime learning credit are worked out and claimed. The credits are generous but come with income limits, document rules and a student-by-student worksheet.
This guide compares the two credits, walks through how the form flows to Schedule 3 and Form 1040 and shows worked examples, using the IRS 2025 Form 8863 and instructions.
| American opportunity credit | Lifetime learning credit | |
|---|---|---|
| Maximum | Up to $2,500 per eligible student: 100% of the first $2,000 and 25% of the next $2,000 of expenses | Up to $2,000 per return: 20% of expenses up to $10,000 |
| Refundable? | 40% may be refundable | Nonrefundable |
| Years | Only 4 tax years per student | Unlimited |
| Phase-out of MAGI | $80,000 to $90,000 ($160,000 to $180,000 joint) | $80,000 to $90,000 ($160,000 to $180,000 joint) |
| EIN of school on Form 8863 | Required | Not required |
You can claim both credits on the same return, but not for the same student. You cannot claim a credit once MAGI reaches $90,000 ($180,000 joint). For the full eligibility rules see our American opportunity credit guide and lifetime learning credit guide.
| Part | What it does |
|---|---|
| Part III (page 2) | Complete one for each student first; line 27 caps American opportunity expenses at $4,000, lines 28 to 30 apply the 25% step, and the lifetime learning side uses the smaller of expenses or $10,000 at 20% |
| Part I | American opportunity credit: the MAGI phase-out on lines 2 to 6, then the refundable part (line 8 is 40% of line 7), entered on Form 1040 line 29 |
| Part II | Nonrefundable credits: the rest of the American opportunity credit, the lifetime learning credit with its own phase-out on lines 13 to 17, and the Credit Limit Worksheet; the result goes on Schedule 3 line 3 |
MAGI is generally Form 1040 line 11b, plus excluded foreign or Puerto Rico income if you have any. For the American opportunity credit the phase-out uses lines 2 to 6: subtract your MAGI from $90,000 ($180,000 joint) and divide by $10,000 ($20,000 joint); if the result is zero or less you cannot take an education credit. See our Schedule 3 guide.
| Case | Calculation | Result |
|---|---|---|
| American opportunity credit, $4,000 of expenses, MAGI below the range | $2,000 + 25% x $2,000 | $2,500; 40% refundable = $1,000, $1,500 nonrefundable |
| Lifetime learning credit, $6,000 of expenses | 20% x $6,000 | $1,200 |
| Single filer with MAGI of $85,000 and the $2,500 credit | ($90,000 - $85,000) / $10,000 = 0.500; $2,500 x 0.500 | $1,250 |
These assume the student meets every other requirement, the credits are limited to your tax where nonrefundable and expenses are net of scholarships.
The law requires you or your dependent to have received Form 1098-T from an eligible institution, with exceptions the instructions list (for example when the school is not required to issue one). Expenses paid by qualified scholarships do not count. To claim the American opportunity credit, you and the student must have been issued a taxpayer identification number by the due date of the return, including extensions, and you must enter the school's employer identification number (EIN) on the form. If an American opportunity credit was denied or reduced for a reason other than a math or clerical error for a year after 2015, attach Form 8862 the next time. The refundable part is not available if you were under age 24 at the end of the year and meet the instructions' age and support conditions, at least one of your parents was alive and you are not filing a joint return. See our Form 1098-T guide.
Next year's change (draft, not final): the IRS draft 2026 instructions for Form 8863 say that beginning in tax year 2026 you must have a valid social security number issued before the return's due date to claim either credit (one spouse is enough on a joint return), and a dependent student must have one too. The MAGI limits in the draft are unchanged. This applies to returns filed in 2027, not to the 2025 returns this guide walks through.
IRS: Instructions for Form 8863, Education Credits, IRS: Form 8863, Education Credits.