Kentucky Education Tuition Tax Credit
The education credits are: 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
American Opportunity Credit:
Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment of attendance (for an eligible educational institution located in Kentucky).
Lifetime Learning Credit:
Tuition and required enrollment fees (including amounts required to be paid to the institution for course-related books, supplies and equipment) .
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. The institution must be eligible to participate in a student aid program administered by the Department of Education. The institution attended must 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 qualifying student. You can take the American Opportunity Credit for a student if all of the following apply.
* As of the beginning of 2016, 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.
* 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 2016. If the American Opportunity Credit (and Hope scholarship credit) has been claimed for this student for any 3 or fewer tax years before 2016, 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 2016.
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.
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.