Article: 50323

Overview

Kentucky’s Education Tuition Tax Credit, claimed using Form 8863‑K, allows eligible taxpayers to receive a credit based on federal educational tax credits, specifically the American Opportunity or Lifetime Learning Credit. It applies only to qualified expenses at Kentucky post-secondary institutions and is calculated at 25% of the federal credit amount.

Eligibility Requirements (Part I)

To qualify, you must:

• Be eligible for the federal American Opportunity or Lifetime Learning Credit.
• Have paid qualified tuition and related expenses to an accredited post-secondary institution physically located in Kentucky.
• File as single, married filing jointly, or married filing separately on a combined return not filing separately.

How the Credit Works

1. American Opportunity Credit (Part II)
   • Enter student name, SSN, institution information, and qualified expenses.
   • Kentucky credit = 25% of the federal AOC, up to $625 per student
2. Lifetime Learning Credit (Part III)
   • Enter similar student and expense information.
   • Kentucky credit = 25% of the federal LLC, up to $500 per return

Carryforward Rules

• Unused credits can be carried forward for up to 5 years.
• You must have completed Form 8863‑K for each prior year to claim carryforward.

Important Information

• Eligibility for credit requires federal qualification for AOC or LLC.
• Amount is limited to 25% of the respective federal credit per student or per return.
• KY credit cannot exceed state tax liability; excess becomes carryforward.
• KY institutions only—out-of-state colleges or universities/international schools do not qualify.

Add Form 8863-K

To add the Form 8863-K:

1. Go to the State taxes section.
2. Select I’d like to see the forms I’ve filled out or search for a form.
3. In the drop list, select Kentucky.
4. Select the Credits tab.
5. Select 8863K – Kentucky Education Tuition Tax Credit to add and open the form.
6. Complete the form with your applicable information.
7. Click Save to apply changes.

Further Information

See the KY 740 instructions for more information.