Updated October 28, 2026. Quick answer: Worksheet 2-1 in Publication 970 figures the modified adjusted gross income that the American opportunity credit is phased out by. For most filers it is simply the AGI on Form 1040 line 11a; the worksheet adds back foreign and territory exclusions and sends the result to Form 8863 line 3.
More on the 2026 tax figures: the education credit phase-out for 2026.
What it is for
The publication states the phaseout: “The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).” “You can’t claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).” Of the measure itself it says “You can use Worksheet 2-1 to figure your MAGI.” The matching worksheet for the other education credit is Worksheet 3-1.
The seven lines
| Line | What the worksheet says |
|---|---|
| 1 | “Enter your adjusted gross income (Form 1040 or 1040-SR, line 11a)” |
| 2 | “Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45)” |
| 3 | “Enter your foreign housing deduction (Form 2555, line 50)” |
| 4 | “Enter the amount of income from Puerto Rico you are excluding” |
| 5 | “Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)” |
| 6 | “Add the amounts on lines 2, 3, 4, and 5” |
| 7 | “Add the amounts on lines 1 and 6. This is your modified adjusted gross income. Enter here and on Form 8863, line 3” |
Line 11a or line 11b
The publication points to line 11a, and the Form 8863 instructions point to line 11b: “Generally, your MAGI is the amount on your Form 1040 or 1040-SR, line 11b. However, if you’re filing Form 2555, or Form 4563, or are excluding income from Puerto Rico, you must include on line 3 the amount of income you excluded.” They are the same AGI. On the 2025 Form 1040, line 11b reads “Amount from line 11a (adjusted gross income)”, repeating line 11a at the top of page 2.
What counts as MAGI
“MAGI when using Form 1040 or 1040-SR. If you file Form 1040 or 1040-SR, your MAGI is the AGI on line 11a of that form, modified by adding back any:” the foreign earned income exclusion, the foreign housing exclusion, the foreign housing deduction, the exclusion of income by bona fide residents of American Samoa, and the exclusion of income by bona fide residents of Puerto Rico.
A plain filer
Illustration with an invented AGI. A filer with no foreign or territory exclusions leaves lines 2 to 5 at zero, so MAGI equals AGI.
| Item | Amount |
|---|---|
| Line 1: AGI from Form 1040 line 11a (an invented input for the computation) | $92,000 |
| Lines 2 to 5: no foreign or territory exclusions | $0 |
| Line 6, computed: lines 2 + 3 + 4 + 5 | $0 (computed) |
| Line 7, computed: line 1 + line 6, to Form 8863 line 3 | $92,000 (computed) |
At a MAGI of $92,000 a single filer is above the $90,000 limit and gets no credit, while on a joint return $92,000 is below the $160,000 point where the phaseout starts, so the credit is not reduced.
The publication’s phaseout example
“Phaseout. If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using” lines 2 to 7 of Form 8863. The publication’s example is a joint return with a MAGI of $165,000 and $5,000 of qualified education expenses.
| Step | Amount |
|---|---|
| Tentative American opportunity credit: 100% of the first $2,000 plus 25% of the next $2,000 | $2,500 (computed) |
| MAGI (joint return) | $165,000 |
| Numerator: $180,000 upper limit minus MAGI | $15,000 (computed) |
| Denominator: the phaseout range, $160,000 to $180,000 | $20,000 (computed) |
| Reduced credit, computed: $2,500 x $15,000 / $20,000 | $1,875 (computed) |
The reduced credit is $1,875. Form 8863 does this calculation for you once line 3 holds the MAGI from this worksheet.
Edition
This page reads Publication 970 (2025), the file irs.gov served on 2026-10-28 (sha256 in the kit data). It covers the 2025 return, filed in 2026. Check the tax year printed on the worksheet in your own copy and use that year’s line numbers and dollar amounts, because a different year’s worksheet can word its lines differently.
Common mistakes
- Entering AGI from a different line. The worksheet starts with Form 1040 or 1040-SR line 11a.
- Forgetting to add back the Form 2555 exclusion or housing deduction when you live abroad.
- Using this worksheet’s result for the lifetime learning credit. That credit has its own worksheet and goes to Form 8863 line 14.
- Assuming the credit disappears at $80,000. For a single filer it starts to phase out there and is gone at $90,000.
Related: Form 8863, Form 8863 lines 1 to 8, lifetime learning credit MAGI worksheet, and education credits.
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Answer againSources
- Publication 970 (2025), Tax Benefits for Education: https://www.irs.gov/pub/irs-pdf/p970.pdf
- Instructions for Form 8863 (2025), Education Credits: https://www.irs.gov/pub/irs-pdf/i8863.pdf
- Form 1040 (2025), U.S. Individual Income Tax Return: https://www.irs.gov/pub/irs-pdf/f1040.pdf
Read from the IRS documents linked above on October 28, 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.