Updated October 18, 2026. Quick answer: Part I takes the American opportunity credit total from Part III, line 30, applies the income phase-out using your MAGI from Form 1040, and then finds the refundable part on line 8. Line 1 comes from your students, line 3 from your Form 1040, and line 8 goes to Form 1040. Some filers who were under age 24 at the end of 2025 skip line 8 and check the box on line 7.
IRS worksheets read line by line: Form 8863 Credit Limit Worksheet.
Line 1: the total from Part III
The caption reads “After completing Part III for each student, enter the total of all amounts from all Parts III, line 30”. The instructions say “Enter the amount from Part III, line 30.” They continue: “If you’re claiming the American opportunity credit for more than one student, add the amounts from each student’s Part III, line 30, and enter the total for those students on line 1.” The credit itself is described this way: “This credit equals 100% of the first $2,000 and 25% of the next $2,000 of adjusted qualified education expenses paid for each eligible student.” The student pages are lines 20 to 22, lines 23 to 26 and lines 27 to 30 of the Form 8863 walk-through.
Lines 2 to 6: the income limit and phase-out
Line 2 reads “Enter $180,000 if married filing jointly; or $90,000 if single, head of household, or qualifying surviving spouse”. Line 3 is your income figure. The instructions say “Enter your MAGI. Generally, your MAGI is the amount on your Form 1040 or 1040-SR, line 11b.” For some filers the number changes: “you must include on line 3 the amount of income you excluded.” That follows the filing of Form 2555 or Form 4563 or excluding income from Puerto Rico. The Form 1040 figure is explained on the Form 1040 AGI page.
Line 4 does the subtraction and can end the form: “Subtract line 3 from line 2. If zero or less, stop; you can’t take any education credit”. The instructions describe the same limit in prose: “The amount of your credit 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).” They add “You cannot claim a credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).”
Line 5 reads “Enter $20,000 if married filing jointly; or $10,000 if single, head of household, or qualifying surviving spouse”. Line 6 turns the comparison into a decimal: “Equal to or more than line 5, enter 1.000 on line 6; or” “Less than line 5, divide line 4 by line 5. Enter the result as a decimal (rounded to at least three places).”
Line 7: multiply, and the under age 24 rule
The caption for line 7 begins “Multiply line 1 by line 6.” The caution on the same line says “If you were under age 24 at the end of the year and meet the conditions described in the instructions, you can’t take the refundable American opportunity credit; skip line 8, enter the amount from line 7 on line 9, and check this box”.
The instructions set out who falls under that rule: “you cannot claim any part of the American opportunity credit as a refundable credit on your tax return.” The test is “You don’t qualify for a refundable American opportunity credit if 1 (a, b, or c), 2, and 3 below apply to you.” Two of the three conditions are “At least one of your parents was alive at the end of 2025.” and “You’re not filing a joint return for 2025.” The first condition turns on your age, earned income, support and student status, and the instructions define those terms. Then: “If you meet these conditions, check the box next to line 7, skip line 8, and enter the amount from line 7 on line 9.” “If these conditions don’t apply to you, complete line 8.”
Line 8: the refundable credit
The caption reads “Refundable American opportunity credit. Multiply line 7 by 40% (0.40). Enter the amount here and on Form 1040 or 1040-SR, line 29.” The form then says to go to line 9, which starts the lines 9 to 19 page.
A form arithmetic illustration
A computed illustration, not an IRS example: suppose a single filer has a line 3 figure of $85,000 and a line 1 total of $2,500. Line 4 is $90,000 minus $85,000, or $5,000. Line 5 is $10,000, so line 6 is $5,000 divided by $10,000, or 0.500. Line 7 is $2,500 times 0.500, or $1,250, and line 8 is $1,250 times 0.40, or $500. The figures are invented to show how the lines connect.
Where the number comes from
Line 1 comes from Part III, line 3 from your Form 1040, and the other figures from the form’s own captions. The Form 1040 side is explained on the Form 1040 lines 29 to 31 page, and the school statement on the Form 1098-T page.
Where it goes next
Line 8 goes to Form 1040 line 29, as the caption above says. The rest of the credit moves to Part II on line 9, covered on the lines 9 to 19 page. For the whole form, see Form 8863.
Edition and line numbers
This page reads the 2025 Form 8863 (Education Credits) and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The form says “Attach to Form 1040 or 1040-SR.” Check the tax year printed on the form you are filling in and use the line numbers on that year’s form, because a different year’s form can number or word its lines differently.
Common mistakes
- Entering plain AGI on line 3 without checking for excluded income. The instructions say “you must include on line 3 the amount of income you excluded.”
- Continuing after a zero on line 4. The form says “If zero or less, stop; you can’t take any education credit”
- Taking the refundable part when the age rule applies. The caution says “skip line 8, enter the amount from line 7 on line 9, and check this box”
Related: Form 1040 lines 29 to 31, Form 1040 AGI, Form 1098-T, and Schedule 3 line 3.
Sources
- Instructions for Form 8863, Education Credits (2025): https://www.irs.gov/pub/irs-pdf/i8863.pdf
- Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) (2025): https://www.irs.gov/pub/irs-pdf/f8863.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.