IRS Form 8863, Education Credits, also known as the American Opportunity and Lifetime Learning Credits form is designed for parents and students who may qualify for college-related tax benefits. Form 8863 helps taxpayers pay for the first four years of post-secondary education. The benefits that can be claimed include tuition, enrollment fees, books and other course related materials that are considered standard for attending college. The IRS requires that students who apply for the credits be enrolled in college at least half of the year. Expenses of $4,000 or more in 2011 can mean a tax credit of $2,500 per student per year. The full credit is available for taxpayers with gross income less than $80,000 or joint filers with income of $160,000 or less. The credit is phased out for any taxpayers for incomes above those levels.
Also included on the form is the Lifetime Learning Credit, which is useful for graduate students or adult students who take college courses. The Lifetime Learning Credit is limited to $2,000 per student per year, and applies for the same types of expenses.
To fill out Form 8863 for these education tax credits, taxpayers will need to provide certain types of information. This includes the Student’s Name, Student Social Security Number and Gross Qualified Expenses. Parents and students will need to fill out the calculation worksheet attached to the form, which can take a bit of time. It’s important to note that a popular tax scam has involved students and low income families, where criminals have claimed that families can get more deductions and credits back than they are owed. Make sure that you review your income tax return and IRS Form 8863 for the correct information before filing your federal tax returns.
In addition, student loan payment interest can be deducted up to $2,500 for parents, students or former students who made loan payments during 2011. The deduction is claimed on IRS Form 1040, or 1040A.