Form 8863, Education Credits, is the form you attach to your return to claim the American opportunity credit or the lifetime learning credit for college costs. The American opportunity credit is worth up to $2,500 per eligible student and up to 40% of it can be refunded; the lifetime learning credit is worth up to $2,000 per return and isn't refundable. For 2025 both shrink between $80,000 and $90,000 of modified AGI, or $160,000 and $180,000 on a joint return.
The form does the arithmetic, but the eligibility rules decide whether you get anything at all. Everything below comes from the IRS Instructions for Form 8863 (2025), and the figures are as of October 2026.
The two credits side by side
| Feature | American opportunity credit | Lifetime learning credit |
|---|---|---|
| Maximum | Up to $2,500 per eligible student | Up to $2,000 per return |
| How it's figured | 100% of the first $2,000 and 25% of the next $2,000 of adjusted qualified expenses | 20% of up to $10,000 of adjusted qualified expenses |
| Refundable | 40% may be refundable; the rest is nonrefundable | Nonrefundable, limited to the tax you owe |
| Years available | Only 4 tax years per eligible student | Unlimited number of tax years |
| Enrollment | At least half-time for at least one academic period | One or more courses |
| Felony drug conviction | Student mustn't have one as of the end of 2025 | Doesn't make the student ineligible |
| Income limit 2025 | Phases out $80,000 to $90,000 ($160,000 to $180,000 joint) | Same range |
You can claim both credits on the same return, but not for the same student. With two students in college, you might take the American opportunity credit for one and the lifetime learning credit for the other.
The Form 1098-T rule
To claim either credit, the law requires that you or your dependent received Form 1098-T from an eligible educational institution, domestic or foreign. There are exceptions, for example when the school isn't required to furnish one, such as for a qualified nonresident alien or expenses paid entirely with scholarships.
If the school should have sent one and didn't, you can still claim if you take the steps the instructions set out. After January 31, 2026, but before you file, you or the student must ask the school for the 1098-T, cooperate with its efforts to produce it, and be able to show enrollment and payment of qualified tuition and related expenses. The amount in box 1 of the 1098-T may also differ from what you can claim, so work from your own payment records too.
What counts as a qualified expense
Generally, qualified education expenses are amounts paid in 2025 for tuition and fees required for the student's enrollment or attendance at an eligible school. It doesn't matter whether you paid in cash, by card or with borrowed funds. Personal expenses never count: room and board, insurance, medical costs including student health fees, and transportation are all out.
| Expense | American opportunity credit | Lifetime learning credit |
|---|---|---|
| Tuition and required fees | Yes | Yes |
| Books, supplies and equipment needed for the course | Yes, wherever you buy them | Only if they must be paid to the school as a condition of enrollment |
| Room and board | No | No |
| Student health fees | No | No |
One timing rule helps families who pay early. Tuition paid in December 2025 for an academic period that begins in the first 3 months of 2026 counts toward the 2025 credit, and only that year.
Rules that catch people out
- You need the school's employer identification number to claim the American opportunity credit. It's usually on the 1098-T or available from the school.
- A taxpayer identification number is needed by the due date of the return, including extensions, for you and for the student. Without one, the American opportunity credit isn't allowed on the original or an amended return.
- If you claim the American opportunity credit when you aren't eligible, you can be banned from claiming it for 2 years after a final finding of reckless or intentional disregard of the rules, or 10 years after a finding of fraud.
- If the credit was denied or reduced for any reason other than a math or clerical error for a tax year beginning after 2015, Form 8862 has to go with the next return on which you claim it.
- You can't claim a credit if your MAGI is $90,000 or more, or $180,000 or more on a joint return.
How to fill in Form 8863
- Gather Form 1098-T and receipts for tuition and required fees paid in 2025.
- Subtract tax-free help such as scholarships and grants to get adjusted qualified education expenses.
- Decide which credit to use for each student, remembering the 4-year cap and the half-time rule for the American opportunity credit.
- Complete Part III for each student, with the school's details.
- Work through Parts I and II to apply the income limit and split the refundable and nonrefundable amounts.
- Attach Form 8863 to your Form 1040 or 1040-SR.
If you find you missed the credit on a return you've already filed, an amended return on Form 1040-X is the usual route, subject to the TIN rule above.
The verdict
For most undergraduates in their first four years, the American opportunity credit is the stronger choice, because it's bigger and part of it comes back as a refund even if you owe no tax. The lifetime learning credit is the fallback for graduate study, single courses or a fifth year. Check the 1098-T and the TIN rules before you file, because those are where valid claims get lost.
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Frequently asked questions
What is Form 8863?
It's the form you file with your return to claim the American opportunity credit or the lifetime learning credit.
How much is the American opportunity credit?
Up to $2,500 per eligible student: 100% of the first $2,000 and 25% of the next $2,000 of adjusted qualified expenses, with up to 40% refundable.
How much is the lifetime learning credit?
20% of up to $10,000 of adjusted qualified expenses, so up to $2,000 per return, and it isn't refundable.
What are the 2025 income limits for education credits?
Both credits phase out between $80,000 and $90,000 of modified AGI, or $160,000 and $180,000 if married filing jointly.
Can I claim both education credits?
Yes on the same return, but not for the same student in the same year.
Do I need a 1098-T to claim Form 8863?
Generally yes, unless the school isn't required to furnish one, or you take the required steps after January 31 when a required form doesn't arrive.
