Instructions for Form 8863 (2011)

Part IAmerican Opportunity Credit

You may be able to take a credit of up to $2,500 for adjusted qualified education expenses (defined earlier) paid for each student who qualifies for the American opportunity credit. This credit equals 100% of the first $2,000 and 25% of the next $2,000 of qualified expenses paid for each eligible student. The amount of your credit for 2011 is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You cannot claim a credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

Student qualifications. Generally, you can take the American opportunity credit for a student if all of the following apply.

As of the beginning of 2011, the student had not completed the first 4 years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations.
The student was enrolled in 2011 in a program that leads to a degree, certificate, or other recognized educational credential.
The student was taking at least one-half the normal full-time workload for his or her course of study for at least one academic period beginning in 2011.
As of the end of 2011, the student had not been convicted of a felony for possessing or distributing a controlled substance.

If any of the above conditions are not met for any student, you cannot take the American opportunity credit for that student. You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead.

Line 1

Complete columns (a) through (f) on line 1 for each student who qualifies for and for whom you elect to take the American opportunity credit.

More than three students. If you are taking this credit for more than three students, enter “See attached” next to line 1 and attach a statement with the required information for each additional student. Include the amounts from line 1, column (f), for all students in the total you enter on line 2.

Column (c). For each student, enter the amount of adjusted qualified education expenses (defined earlier). To be allowed the credit for 2011, the expenses must have been paid for the student in 2011 for academic periods beginning after 2010 but before April 1, 2012, as explained earlier under Prepaid Expenses. If the student's expenses are more than $4,000, enter $4,000. You can use the worksheet below to figure the correct amount to enter in column (c).

Qualified Education Expenses Worksheet
for Part I, Line 1, Column (c)
See Qualified Education Expenses, earlier, before completing.

(Do a separate worksheet for each student)

1.	Total qualified education expenses
2.	Less adjustments:
	a.	Tax-free educational assistance
	b.	Refunds of qualified education expenses paid in 2011
3.	Total adjustments (add lines 2a and 2b)
4.	Adjusted qualified education expenses. Subtract line 3 from line 1. If zero or less, enter -0-
5.	Enter the smaller of line 4 or $4,000 here and on Form 8863, Part I, column (c)

Part IILifetime Learning Credit

The lifetime learning credit equals 20% of adjusted qualified education expenses (defined earlier), up to a maximum of $10,000 of adjusted qualified education expenses per return. Therefore, the maximum lifetime learning credit you can claim on your return for the year is $2,000, regardless of the number of students for whom you are claiming the credit. The amount of your credit for 2011 is gradually reduced (phased out) if your MAGI is between $51,000 and $61,000 ($102,000 and $122,000 if you file a joint return). You cannot claim a credit if your MAGI is $61,000 or more ($122,000 or more if you file a joint return).

You cannot claim the lifetime learning credit for any student for whom you are claiming the American opportunity credit in the same tax year.

Line 3

Complete columns (a) through (c) on line 3 for each student for whom you are taking the lifetime learning credit.

More than three students. If you are taking the lifetime learning credit for more than three students, enter “See attached” next to line 3 and attach a statement with the required information for each additional student. Include the amounts from line 3, column (c), for all students in the total you enter on line 4.

Column (c). For each student, enter the amount of adjusted qualified education expenses (defined earlier). The expenses must have been paid for the student in 2011 for academic periods beginning after 2010 but before April 1, 2012, as explained earlier under Prepaid Expenses. You can use the Qualified Education Expenses Worksheet for Part II, Line 3, Column (c), later, to figure the correct amount to enter in column (c).

Qualified Education Expenses Worksheet
for Part II, Line 3, Column (c)
See Qualified Education Expenses, earlier, before completing.

(Do a separate worksheet for each student)

1.	Total qualified education expenses
2.	Less adjustments:
	a.	Tax-free educational assistance
	b.	Refunds of qualified education expenses paid in 2011
3.	Total adjustments (add lines 2a and 2b)
4.	Adjusted qualified education expenses. Subtract line 3 from line 1. Enter here and on Form 8863, Part II, column (c). If zero or less, enter -0-

Part IIIRefundable American Opportunity Credit

Line 13

If you were under age 24 at the end of 2011 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, your allowed credit, which is figured in Part IV, will be used to reduce your tax as a nonrefundable credit only.

You do not qualify for a refund if 1 (a, b, or c), 2, and 3 below apply to you.

1.	You were:
	a.	Under age 18 at the end of 2011, or
	b.	Age 18 at the end of 2011 and your earned income (defined later) was less than one-half of your support (defined later), or
	c.	Over age 18 and under age 24 at the end of 2011 and a full time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
2.	At least one of your parents was alive at the end of 2011.
3.	You are not filing a joint return for 2011.

If you meet these conditions, check the box next to line 13, skip line 14, and enter the amount from line 13 on line 15.

Earned income. Examples of earned income include wages, salaries, tips, and other taxable employee pay; net earnings from self-employment; and gross income received as a statutory employee. Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers.

Support. Your support includes all amounts spent to provide you with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your support, count support provided by you, your parents, and others. However, a scholarship received by you is not considered support if you were a full-time student (defined below) for 2011.

Full-time student. You were a full-time student for 2011 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency.

Part IVNonrefundable Education Credits

Line 16

Enter your tentative lifetime learning credit from Part II, line 6, and go to line 17.
Note. If you are claiming only the American opportunity credit, you will not have an entry on this line. Instead, enter the amount from line 15 on line 6 of the Credit Limit Worksheet below.

Line 22

You will have an amount on line 22 if you are claiming the lifetime learning credit. Enter this amount on line 1 of the Credit Limit Worksheet below.

Line 23

Complete the credit limit worksheet to figure your nonrefundable education credit.

Credit Limit Worksheet—Form 8863, Line 23

Nonrefundable lifetime learning credit
1.	Enter the amount from Form 8863, line 22			1.
2.	Enter the amount from Form 1040, line 46, or Form 1040A, line 28		2.
3.	Enter the total, if any, of your credits from:
	•	Form 1040, lines 47, 48, and the amount from Schedule R entered on line 53	3.
	•	Form 1040A, lines 29 and 30	3.
4.	Subtract line 3 from line 2			4.
5.	Nonrefundable lifetime learning credit. Enter the smaller of line 1 or line 4			5.
Nonrefundable American opportunity credit
6.	Enter the amount from Form 8863, line 15			6.
7.	Enter the amount from Form 1040, line 46, or Form 1040A, line 28		7.
8.	Enter the total, if any, of your credits from:
	•	Form 1040, lines 47, 48, and the amount from Schedule R entered on line 53, and the amount from line 5 above	8.
	•	Form 1040A, lines 29 and 30, and the amount from line 5 above	8.
9.	Subtract line 8 from line 7			9.
10.	Nonrefundable American opportunity credit. Enter the smaller of line 6 or line 9			10.
11.	Nonrefundable education credits. Add line 5 and line 10. Enter here and on Form 8863, line 23			11.

Specific Instructions