 Income tax 2021-2022. Specific instructions, part two. If you're ready to get refunds to the max, dive in into Income Tax 2021-2022. Most of this information can be found in the Form 8863 Instructions Tax Share 2021 IRS website, irs.gov, irs.gov. Income tax formula, we're down here in the credit area, noting that both deductions and credits are good, a dollar deduction and a dollar credit. The dollar credit would typically be better because you get the full dollar's worth of benefit as opposed to the dollar deduction, which would be a decrease to the taxable income the tax then applied upon it. Note that the categories for the credits typically fall in to the non-refundable credits and then the refundable credits, non-refundable credits not taking the tax liability below zero, the refundable credits may, and if they did, then the refund that you would give isn't really a refund at that point. It would be more like a benefit type of situation at that point. Now, and also note, we might have some credits that have a non-refundable component and a refundable component to them. We're now on Form 8863. These are the education credits. We've got the American Opportunity and Lifetime Learning credits. We typically think of them as kind of combined together because we want to first see if we qualify for the American Opportunity credit, which would typically be more beneficial if we did, if we don't, then we go for that Lifetime Learning credit. This is Page 2 of the Form 1040. We're looking at the non-refundable area and that's going to be Line 20 that flows in here from Schedule 3. And then we got the bottom of Page 2, Line 29, which is the refundable area, and it's the American Opportunity credit from Form 8863, Line 8. So now we're on Part 2, the non-refundable education credits. In the prior presentation, we looked at some of the other components, so we went into the form here. We looked at Part Number 1, which we had to jump on over to Page 2 in Part 3 to kind of pull that information over to Part 1. So that 2,500 in essence coming from Page 2, where we actually list out the individual and the institution and so on and so forth. And then this amount for the American Opportunity credit we saw pulled over in essence to Line 1 up top and then, and now we're basically going down to Part 2, which is the non-refundable education credits. Okay, so let's jump back on over and we're on Line 9. Line 9, enter the amount from Line 9 on the credit limit worksheet Line 2 later and see then we have Line 10, enter the amount from Part 3, Line 31. If you're claiming the lifetime learning credit for more than one student, add the amounts from each student's Part 3, Line 31, and enter totals for all those students on Line 10. So in this case, we're looking at the non-refundable component. We had the refundable item, which is basically the American Opportunity credit. And then the non-refundable we pulled in down here, which says subtract Line 8 from 7, enter here and on Line 2 of the credit worksheet. And the credit worksheet would basically be in the instructions. And then Line 10 after completing Part 3 for each student, enter the total of all amounts from all Part 3, Line 31. So if I go on over to Part 3 and we're looking at Line 31, Line 31, the lifetime learning credits, which we haven't put anything in at this point. So let's add another one. I got Sam Smith. Now this is going to be the dependent. And we're going to say then we've got the lifetime learning credit information, adjusted qualified education expenses, which is going to flow in to Page 1. And now we're looking at the non-refundable education credits because we're assuming this one didn't qualify for the American Opportunity credit. So then we're down here, Line 10. We've got the 20,000 pulling in. So then we're going to say Line 10. We've got that Line 14. Generally your modified AGI, basically your income threshold is the amount on your Form 1040 or 1040 SR Line 11. However, if you're filing the Form 2555 or Form 4563 or are excluding income from Puerto Rico, you must include Line 14 amount excluded. So Line 14 then is basically going to be the 20,000. And so this is being pulling in from generally the Form 1040 here. And it's being pulled in from the adjusted gross income line on Line 20, currently at the 20,000. So there is that item. And we're back down here on, there we are. I was on the wrong form. Okay. So there we go. Okay. So we got Part 2 on non-refundable education credits continued. Line 18 entered the amount from Line 18 on the Credit Limit Worksheet Line 1 later and then entered the amounts from Line 7 on Line 19. We're looking at entered the amounts from Line 7 of the Credit Limit Worksheet here on Schedule 3, Line 3. So the Credit Limit Worksheet, these are Line 18 and 19. We're going to populate those down here, Line 18 and 19, multiply Line 12 by Line 17. So Line 12 is the 20% times Line 17, which is the 1 right now because I believe that's going to be the phase out threshold. So we had Line 12, which is 20%, which was that 2000, which is currently being maxed out. And then we'll multiply that out. So we got the 2000 here. And then Line 19, non-refundable, because it's non-refundable, in essence, you got your worksheet here, which is limiting it to the tax liability that we can see basically on the 1040. You can see that our tax liability is crimping the amount of the credit lessening the amount of the credit because it is non-refundable. Okay, so here's the Credit Limit Worksheet, complete this worksheet to figure the amount to enter on Line 19, enter the amount from Form 863, Line 18, enter the amount from Line Line, add Lines 1 and 2. So I won't go through this whole thing. I really kind of like the worksheet on the tax software. So we might dive into that in a bit more detail on the software caution. You must complete Part 3 for each student for whom you're claiming either the American Opportunity Credit or Lifetime Learning Credit before complete either Part 1 or Part 2. So that's a bit confusing. Part 3 is on page 2, and notice I have two pages for Part 3 because that's naming the person who the credit is for, who we're making the payments for. It's giving us the institution and the conditions as to whether we qualify for the Lifetime Learning or American Opportunity or the American Opportunity or Lifetime Learning. So this first one, we've got qualifying for the American Opportunity, and then the second one, which is going down to our other item here, which is the dependent, also going to Cool You is qualifying this time for the Lifetime Learning for that individual given the circumstances we put in play. So then I use additional copies of page 2 as needed for each student as we saw.