8863 Education Credits (Hope and Lifetime Learning Credits)

2007 Form 8863, Education Credits (Hope and Lifetime Learning Credits)
Purpose: This is the first circulated draft of the 2007 Form 8863, Education
Credits (Hope and Lifetime Learning Credits) for your review and comments.
The major changes are listed below.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2006 Form 8863 is available at:
http://www.irs.gov/pub/irs-pdf/f8863.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and
publications are posted at:
http://taxforms.web.irs.gov/draft_products.html
Comments: Please email, fax, call, or mail any comments by May 29, 2007.
Gregg M. Lynam
Tax Forms and Publications
SE:W:CAR:MP:T:I:S

Email: Gregg.M.Lynam@irs.gov
Phone: 202- 622- 4056
Fax: 202- 622- 5022

Major Changes to the 2007 Form 8863
•

We added a second caution at the top of the form to reflect the extension
of the tuition and fees deduction under IRC 222 (PL 109-432, sec. 101)
and to reflect IRC 222(c)(2)(A). See the 2005 version of Form 8863.

•

The asterisks in line 1(c) and 1(d) and the footnotes to line 1 were
removed to reflect the expiration of the special education benefits under
IRC 1400O for individuals attending an eligible institution in the GO Zone.

•

We deleted lines 5b and 5c and renumbered line 5a to line 5, deleted lines
6a and 6b and renumbered line 6c to line 6, and revised the instructions
on line 6 to reflect the expiration of the special education benefits under
IRC 1400O for individuals attending an eligible institution in the GO Zone.

•

We revised the amounts on line 8 to reflect inflationary increases per
Revenue Procedure 2006-53 of the amounts in IRC 25A(d)(2) used to
figure the reduction in the allowable credits.

•

We replaced lines 14 through 17 with new lines 14 through 19 to reflect
the application of the tax liability limit under IRC 26(a)(1) because the
special rule under IRC 26(a)(2) no longer applies for 2007. If Congress
later passes legislation to extend the application of IRC 26(a)(2) to 2007, a
revision will be required.

•

We removed the What’s New item on page 2 regarding the increase to the
amount of the Hope credit as this amount did not change for 2007. We
also removed the What’s New section of the General Instructions as there
are no other new items.

•

We removed the Reminder item on page 2 regarding the special
education benefits under IRC 1400O for individuals attending an eligible
institution in the GO Zone as IRC 1400O expired 12/31/2006. We also
removed the Reminders section of the General Instructions as there are
no other items.

•

We removed the Caution near the bottom of the left column on page 2
regarding the possible reinstatement of the deduction for tuition and fees
per PL 109-432, sec. 101.

•

We removed the section Special Rules for Gulf Opportunity Students on
page 3 as IRC 1400O expired 12/31/2006.

•

We removed parenthetical remarks regarding GO Zone students from the
first paragraph of the discussion Hope Credit on page 3 as IRC 1400O
expired 12/31/2006.

•

We removed parenthetical remarks regarding GO Zone students from the
specific instruction for Column (c), under Line 1, on page 3 as IRC 1400O
expired 12/31/2006.

•

We removed parenthetical remarks regarding GO Zone students and the
final sentence from the discussion Lifetime Learning Credit on page 4 as
IRC 1400O expired 12/31/2006.

•

Year references were updated as appropriate.

1
TLS, have you
transmitted all R
text files for this
cycle update?

I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8863, PAGE 1 OF 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20 INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 216mm (81⁄ 2 ") x 279mm (1")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Date

Form

8863

Action

Date

O.K. to print
Revised proofs
requested

OMB No. 1545-0074

Education Credits
(Hope and Lifetime Learning Credits)

2007

f
o
s
a
7
t
0
f
0
a
2
r
/
D /20
4
0
©

Department of the Treasury
Internal Revenue Service (99)

©

Name(s) shown on return

Signature

See instructions.
Attach to Form 1040 or Form 1040A.

Attachment
Sequence No.

50

Your social security number

Caution: ● You cannot take the Hope credit and the lifetime learning credit for the same student in the same year.
● You cannot take both an education credit and the tuition and fees deduction (see Form 8917) for the same student
in the same year.

Part I
1

Hope Credit. Caution: You cannot take the Hope credit for more than 2 tax years for the same student.
(a) Student’s name
(as shown on page 1
of your tax return)
First name
Last name

2

(b) Student’s
social security
number (as
shown on page 1
of your tax return)

(a) Student’s name (as shown on page 1 of your tax return)
First name

11
12

13
14
15
16

17
18
19

(f) Enter one-half
of the amount in
column (e)

2

(b) Student’s social security
number (as shown on page
1 of your tax return)

Last name

Add the amounts on line 3, column (c), and enter the total
Enter the smaller of line 4 or $10,000
Tentative lifetime learning credit. Multiply line 5 by 20% (.20) and go to Part III

Part III

9
10

(e) Add
column (c) and
column (d)

Lifetime Learning Credit

3

7
8

(d) Enter the
smaller of the
amount in
column (c) or
$1,100

Tentative Hope credit. Add the amounts on line 1, column (f). If you are taking the lifetime learning
©
credit for another student, go to Part II; otherwise, go to Part III

Part II

4
5
6

(c) Qualified
expenses (see
instructions). Do
not enter more
than $2,200 for
each student.

(c) Qualified
expenses (see
instructions)

4
5
6

Allowable Education Credits

Tentative education credits. Add lines 2 and 6
Enter: $114,000 if married filing jointly; $57,000 if single, head of household,
or qualifying widow(er)
Enter the amount from Form 1040, line 38*, or Form 1040A, line 22
Subtract line 9 from line 8. If zero or less, stop; you cannot take any
education credits
Enter: $20,000 if married filing jointly; $10,000 if single, head of household,
or qualifying widow(er)

7
8
9
10
11

If line 10 is equal to or more than line 11, enter the amount from line 7 on line 13 and go to
line 14. If line 10 is less than line 11, divide line 10 by line 11. Enter the result as a decimal
(rounded to at least three places)
©
Multiply line 7 by line 12
Enter the amount from Form 1040, line 44, or Form 1040A, line 28 (minus any alternative minimum
tax included on Form 1040A, line 28)
Enter the total, if any, of your credits from Form 1040, lines 47 and 48, or
15
Form 1040A, lines 29 and 30
1040 filers: Enter the amount from Form 6251, line 31 (see instructions)
1040A filers: Enter the amount, if any, from the Alternative Minimum Tax
16
Worksheet, line 23 (see instructions)
Add lines 15 and 16
©
Subtract line 17 from line 14. If zero or less, stop. You cannot take any education credits
Education credits. Enter the smaller of line 13 or line 18 here and on Form 1040, line 49, or Form
©
1040A, line 31

12
13

3 .

14

17
18
19

* If you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from Puerto Rico, see Pub. 970 for the amount to enter.

For Paperwork Reduction Act Notice, see page 4.

Cat. No. 25379M

Form

8863

(2007)

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
Form 8863, PAGE 2 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 216mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8863 (2007)

General Instructions
Purpose of Form

Page

These credits are based on qualified education expenses paid
to an eligible postsecondary educational institution. See Qualified
Education Expenses and Eligible Educational Institution, later, for
more information.

Who Can Take the Credits

You may be able to take the credits if you, your spouse, or a
dependent you claim on your tax return was a student enrolled
at or attending an eligible educational institution. The credits are
based on the amount of qualified education expenses paid for
the student in 2007 for academic periods beginning in 2007 and
the first 3 months of 2008.

CAUTION

● Course-related books, supplies, equipment, and nonacademic
activities, except for fees required to be paid to the institution as
a condition of enrollment or attendance.

f
o
s
a
7
t
0
f
0
a
2
r
/
D /20
4
0

Use Form 8863 to figure and claim your education credits. The
education credits are:
● The Hope credit, and
● The lifetime learning credit.

2

Qualified education expenses must be reduced by
any expenses paid directly or indirectly using
tax-free educational assistance. See Tax-Free
Educational Assistance and Refunds of Qualified
Education Expenses on this page.

Note. If a student is claimed as a dependent on another
person’s tax return, only the person who claims the student as a
dependent can claim the credits for the student’s qualified
education expenses. If a student is not claimed as a dependent
on another person’s tax return, only the student can claim the
credits.
Generally, qualified education expenses paid on behalf of the
student by someone other than the student (such as a relative)
are treated as paid by the student. Also, qualified education
expenses paid (or treated as paid) by a student who is claimed
as a dependent on your tax return are treated as paid by you.
Therefore, you are treated as having paid expenses that were
paid from your dependent student’s earnings, gifts, inheritances,
savings, etc.
You cannot take the education credits if any of the following
apply.
● You are claimed as a dependent on another person’s tax
return, such as your parent’s return (but see the Note above).
● Your filing status is married filing separately.
● Your adjusted gross income on Form 1040, line 38, or Form
1040A, line 22, is (a) $114,000 or more if married filing jointly, or
(b) $57,000 or more if single, head of household, or qualifying
widow(er).
● You (or your spouse) were a nonresident alien for any part of
2007 and the nonresident alien did not elect to be treated as a
resident alien.

Additional Information
See Pub. 970, Tax Benefits for Education, for more information
about these credits.

Rules That Apply to Both Credits
Qualified Education Expenses
Generally, qualified education expenses are amounts paid in
2007 for tuition and fees required for the student’s enrollment or
attendance at an eligible educational institution. It does not
matter whether the expenses were paid in cash, by check, by
credit card, or with borrowed funds.
Qualified education expenses do not include amounts paid for:
● Room and board, insurance, medical expenses (including
student health fees), transportation, or other similar personal,
living, or family expenses.

● Any course or other education involving sports, games, or
hobbies, or any noncredit course, unless such course or other
education is part of the student’s degree program or (for the
lifetime learning credit only) helps the student to acquire or
improve job skills.
You should receive Form 1098-T, Tuition Statement, from the
college or university reporting either payments received in box 1
or amounts billed in box 2. However, the amounts in boxes 1 and
2 of Form 1098-T may be different than what you actually paid.
On Form 8863, lines 1 and 3, enter only the amounts you paid in
2007 for qualified expenses. See chapters 2 and 3 of Pub. 970.
If you or the student take a deduction for higher education
expenses, such as on Schedule A or Schedule C (Form 1040),
you cannot use those expenses when figuring your education
credits.

CAUTION

Any qualified expenses used to figure the education
credits cannot be taken into account in determining
the amount of a distribution from a Coverdell ESA
or a qualified tuition program that is excluded from
gross income.

Tax-Free Educational Assistance and Refunds of
Qualified Education Expenses
Tax-free educational assistance includes a tax-free scholarship
or Pell grant or tax-free employer-provided educational
assistance. See Pub. 970 for specific information.
You must reduce the total of your qualified education
expenses by any tax-free educational assistance and by any
refunds of your expenses. If the refund or tax-free assistance is
received in the same year in which the expenses were paid or in
the following year before you file your tax return, reduce your
qualified education expenses by the amount received and figure
your education credits using the reduced amount of qualified
expenses. If the refund or tax-free assistance is received after
you file your return for the year in which the expenses were paid,
you must figure the amount by which your education credits
would have been reduced if the refund or tax-free assistance
had been received in the year for which you claimed the
education credits. Include that amount as an additional tax for
the year the refund or tax-free assistance was received.
Example. You paid $8,000 tuition and fees in December 2006,
and your child began college in January 2007. You filed your
2006 tax return on February 2, 2007, and claimed a lifetime
learning credit of $1,600. After you filed your return, your child
dropped two courses and you received a refund of $1,400. You
must refigure your 2006 lifetime learning credit using $6,600 of
qualified expenses instead of $8,000. The refigured credit is
$1,320. You must include the difference of $280 on your 2007
Form 1040, line 44, or Form 1040A, line 28. Also, enter “$280”
and “ECR” on the dotted line next to line 44 (if filing Form 1040)
or line 28 (Form 1040A).

Prepaid Expenses
Qualified education expenses paid in 2007 for an academic
period that begins in the first 3 months of 2008 can be used in
figuring your 2007 education credits. For example, if you pay
$2,000 in December 2007 for qualified tuition for the 2008 winter
quarter that begins in January 2008, you can use that $2,000 in
figuring your 2007 education credits (if you meet all the other
requirements).
You cannot use any amount paid in 2006 or 2008
to figure your 2007 education credits.
CAUTION

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
Form 8863, PAGE 3 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD to HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLD TO: 216mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON THE FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8863 (2007)

Eligible Educational Institution

Page

f
o
s
a
7
t
0
f
0
a
2
r
/
D /20
4
0

An eligible educational institution is generally any accredited
public, nonprofit, or proprietary (private) college, university,
vocational school, or other postsecondary institution. Also, the
institution must be eligible to participate in a student aid
program administered by the Department of Education. Virtually
all accredited postsecondary institutions meet this definition.

Specific Instructions
Part I
Hope Credit

3

You may be able to take a credit of up to $1,650 for qualified
education expenses (defined earlier) paid for each student who
qualifies for the Hope credit. The Hope credit equals 100% of the
first $1,100 and 50% of the next $1,100 of qualified expenses
paid for each eligible student. You can take the Hope credit for a
student if all of the following apply.

● As of the beginning of 2007, the student had not completed
the first 2 years of postsecondary education (generally, the
freshman and sophomore 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.

Qualified Education Expenses Worksheet for Column (c)
(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

c. Other adjustments (see Pub. 970)

3. Total adjustments (add lines 2a–2c)

4. Qualified education expenses (subtract
line 3 from line 1). Enter here and on Form
8863, Part I or II, column (c)

Part II
Lifetime Learning Credit

The maximum lifetime learning credit is $2,000, regardless of the
number of students.
You cannot take the lifetime learning credit for any
student for whom you are taking the Hope credit.

● The student was enrolled in 2007 in a program that leads to a
degree, certificate, or other recognized educational credential.

CAUTION

● 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 2007.

Line 3

● The Hope credit was not claimed for that student’s expenses
in more than one prior tax year.

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

● The student has not been convicted of a felony for possessing
or distributing a controlled substance.

Note. 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.

TIP

If a student does not meet all of the above
conditions, 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 Hope credit.
Note. If you have more than three students who qualify for the
Hope credit, 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 qualified education
expenses remaining after reduction by certain tax-free amounts
and refunds, as explained earlier. The expenses must have been
paid for the student in 2007 for academic periods beginning
after 2006 but before April 1, 2008, as explained earlier under
Prepaid Expenses. If the student’s expenses are more than
$2,200, enter $2,200. You may use the worksheet on the next
page to figure the correct amount to enter in column (c).

Column (c)
For each student, enter the amount of qualified education
expenses remaining after reduction by certain tax-free amounts
and refunds, as explained earlier. The expenses must have been
paid for the student in 2007 for academic periods beginning
after 2006 but before April 1, 2008, as explained earlier under
Prepaid Expenses. You may use the worksheet on this page to
figure the correct amount to enter in column (c).
Paperwork Reduction Act Notice. We ask for the information
on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it
to ensure that you are complying with these laws and to allow us
to figure and collect the right amount of tax.
You are not required to provide the information requested on
a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records
relating to a form or its instructions must be retained as long as
their contents may become material in the administration of any
Internal Revenue law. Generally, tax returns and return
information are confidential, as required by Internal Revenue
Code section 6103.

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8863, PAGE 4 OF 4
MARGINS; TOP 13mm (1⁄ 2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432 mm (17") x 279mm (11") FOLD TO: 216mm (81⁄ 2 ") x 279mm (11")
PERFORATE: ON FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8863 (2007)

Page

f
o
s
a
7
t
0
f
0
a
2
r
/
D /20
4
0

The average time and expenses required to complete and file
this form will vary depending on individual circumstances. For
the estimated averages, see the instructions for your income tax
return.

If you have suggestions for making this form simpler, we
would be happy to hear from you. See the instructions for your
income tax return.

Printed on recycled paper

4