Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Education Credits Workout

Determining the Amount of the Credit

Figuring the Credit

Here are the general steps for figuring the amount of education credits:

  1. Review the list of qualifying students and expenses, and decide if the American opportunity credit or lifetime learning credit is more suitable. See the requirements discussed earlier.
  2. Form 8863, Part III, page 2, requests information about the student, the student's eligibility for the credit, and the educational institution(s). Taxpayers must complete Part III for each eligible student for whom they are claiming an education credit before completing Parts I and II.
  3. Enter each student's expenses. Be sure that these:
    • Include only qualified expenses
    • Are reduced by untaxed benefits
    • Do not exceed the limit for the credit
  4. Find the totals for each section and apply the limits, then transfer the amounts to Part I and II to determine the refundable and nonrefundable credits. Apply the income test and do the calculations.

To determine the amount of qualified expenses, please review Form 1098-T and have a discussion with the taxpayer to determine the qualified education expenses paid.


If you find taxpayers claimed an education credit in a prior year and they were refunded part or all of the expenses they used to claim the American opportunity or lifetime learning credit, they may have to repay (recapture) all or part of the credit. This is beyond the scope of the VITA/TCE programs. Information can be found in Publication 970. Advise the taxpayer to consult a professional tax preparer.

Form 8863

Form 8863