Kentucky Education Tuition Tax Credit
Kentucky offers the American Opportunity Credit and the Lifetime Learning Credit. These credits are based on qualified undergraduate education expenses paid to an eligible postsecondary educational institution located in Kentucky. If you elected to claim the education credit for federal purposes rather than the tuition and fees deduction, you must make that same election for Kentucky purposes.
Note: The expenses claimed on the Federal Form 8863 will be used to populate the Kentucky Form 8863-K.
Qualified Education Expenses
Generally, qualified education expenses are amounts paid in 2015 for tuition and fees required for the student’s enrollment or attendance at an eligible educational institution located in Kentucky. It does not matter whether the expenses were paid in cash, by check, by credit card, or with borrowed funds.
Eligible Educational Institution located in Kentucky
An eligible educational institution is generally any accredited public, nonprofit, or 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. The institution must also be physically located in Kentucky to qualify.
American Opportunity Credit
For Kentucky, the credit is then limited to 25% of the allowable federal credit with a maximum amount allowed of $625 for each student who qualified. You can take the American Opportunity Credit for a student if all of the following apply.
- As of the beginning of 2015, 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 exams.
- For at least one academic period beginning or treated as beginning in 2015 (for 2015, treat an academic period beginning in the first 3 months of 2016 as if it began in 2015 if qualified education expenses for the student were paid in 2015 for that academic period) the student was both:
1) enrolled in 2015 in a program that leads to a degree or other recognized educational credential and
2) the student was taking at least one-half the normal full-time workload for his or her course of study for a least one academic period beginning in 2015.
- Neither the American Opportunity credit nor the Hope scholarship credit has been claimed (by you or anyone else) for the student’s expenses for any 4 tax years before 2015. If the American Opportunity Credit (and Hope scholarship credit) has been claimed for this student for any 3 or fewer tax years before 2015, this requirement is met.
- The student has not been convicted of a felony for possessing or distributing a controlled substance, as of the end of 2015.
Note: If a student does not meet all of the above qualifications, you may be able to take the Lifetime Learning Credit for part or all of the student’s qualified education expenses.
Lifetime Learning Credit
For Kentucky, the Lifetime Learning Credit is then limited to 25% of the allowable federal credit with a maximum allowed of $500 per return.
Allowable Education Credits
You cannot take any Kentucky Education Credits if your federal adjusted gross income (federal Form 1040, Line 37 or 1040A, Line 21) exceeds $127,000 if married, filing jointly or married, filing separately on a combined return ($63,000 if single). If you are filing a separate return, you do not qualify for this credit. If your income is greater than $100,000, you may only be entitled to a portion of the credits, if any.
Credit Carry forward from Prior Years
The Kentucky Education Tax credit can be carried forward for up to 5 years if unused during the preceding tax year(s). You must have completed Form 8863-K for any prior year(s) in which you are claiming a credit carry forward.