 Income tax 2021-2022. Specific instructions part number three. Get ready to get refunds to the max. Dive it into Income Tax 2021-2022. Most of this information can be found in the form 8863 Instructions Tax Year 2021 IRS website irs.gov irs.gov. Income tax formula. We're down below in the credit area noting that both deductions and credits are good. But if you had a dollar credit and a dollar deduction credit typically better because you get the full dollars worth of the credit as opposed to the dollar deduction, which just as a decrease to the taxable income on which the tax would then be calculated down here in the credit area. We got two categories typically. We got the non refundable credits and the refundable credits. The non refundable credits don't take the tax liability below zero, but the refundable ones can. And if they do, you might get something called a refund, but it's not really a refund at that point because it's more like a benefit program. Some credits might have a non refundable and refundable component to them. This is the form 8863. This is the education credits, American opportunity and lifetime learning credits. We kind of combined them together, first thinking if we qualify for the American opportunity credit because it's bigger typically. And if not, then see if we can get the default to the lifetime learning credit. This is page two of the form 1040 in the non refundable credit area. Line 20 amount from schedule C that would be rolled in from the form to the schedule C then to page two of the form 1040. Line 20 in this non refundable credit area. Then we've got the bottom half of the page two of the 1040 line 29 refundable area. The American opportunity credit from form 8863 line number eight. So we're continuing on to part number three here in prior presentations. We've been going through our trustee form for form 8863. We looked at part one, we looked at part two, and we've been glancing over here at part three. Because you actually have to do part three first before you do parts one and part two. But now we're formally getting to part three, which is basically where you actually list out the people that are going to the financial institutions, which would typically be either yourself or some dependent on the tax return. You got to list out the institutions, whether they qualify for the lifetime learning credit or the American opportunity credit and then apply those two out. And then that information pulls in to page one. You might have multiple page twos here, which would be part threes for multiple individuals to do this calculation, depending on the complexity of the returns and how many people go into financial or educational institutions are involved. So line 20 enter the students name as shown on page one of your tax return. So we're going to go line 20 page number two. We've got Adam Smith, that's us. And then we've got Sam Smith, that's us as the taxpayer here. So if I go to page one of the tax return, Adam is one person that could be there. Then we've got Sam, which is a dependent. So they're both people being claimed on the tax return and therefore if they're going to an institution might be able to deduct the education expenses for them. And then line 21 enter the student social security number or the TIN, if applicable, as shown on page one. If you have tax software, hopefully this will be nice and easy. You can just pull that information in line 22. If the student attended only one educational institution, enter the information about the institution and answer the questions about form 1098T. So you're going to get the 1098T, which is going to give you the information about the financial institution. We're going to then populate that into part three. And for example, we've got cool you here that we went to. And then the address for it and the number of the EIN number of the educational institution. So then if the student attended a second educational institution, enter the information and answer for the second educational institution in column B. If the student attended more than two educational institutions, attach an additional page completed only through line 22. If the educational institution has a foreign address, enter the foreign address here and don't abbreviate the country name, follow the country's practice for entering the postal code and name for the province, county or country. The educational institutions EIN, they have to have an EIN in order for the IRS to know them, must be provided online 22E if the American Opportunity Credit is claimed for this student. Line 23, if the American Opportunity Credit has been claimed for this student for any four tax years before 2021, the American Opportunity Credit cannot be claimed for this student for 2021, you check yes there. So line 23, here we're going to say like for the second person, we're going to say that that if it's yes, then then we check that online 23 has the Hope Scholarship Credit or American Opportunity. That was the prior name for the American Opportunity Credit Hope Scholarship. I've been claimed for this student for the last four years, if we say yes, well then you can't claim it again is the thing. And so then you're going for the lifetime learning credit. If the American Opportunity Credit has been claimed for this student for three or fewer prior years, check no and see student qualifications. Line 24, check yes if the student enrolled in at least half time for at least one academic period that began or is treated as having begun. See below in 2021 at an eligible educational institution in a program leading towards a post secondary degree certificate or other recognized post secondary educational credential. Otherwise, check no. So this is line 24 let's go let's go up here line 24. And we're going to say was that was the student enrolled at least half time. So how do you figure that you asked the educational institution what does it mean. What does that mean for your institution in terms of how many credits I have to take and whatnot quarter semester whatever you guys talking about. Then you know you get that information to make sure you're fulfilling that requirement for the credit. Pre-qualified education expenses for the student were paid in 2021 for the academic period beginning in the three months of 2022 treat that academic period as if begun in 2021. See student qualifications in prepaid expenses earlier if you checked. Yes, go to line 25 if you check no student isn't eligible for the American Opportunity Credit skip line 25 through 30 and go to 31. In other words, you were going through the question years to see if we qualify to take that better credit, the one that's more beneficial, which would be the American Opportunity Credit. If that would be the case, then we're going to be down here looking into the American Opportunity Credit. If not, for example, our second guy Adam here, or this is, this is Sam, this is Sam. Then if I scroll down didn't qualify because we had already taken, we said up top. So now we're calculating down here in the lifetime learning area. So we're taking the better of the two. We're trying to get the American Opportunity, but if we don't qualify it, we go for the lifetime learning. That's how we do it. Line 25. Check. Yes. If the student completed the first four years of post-secondary education, otherwise check no. A student has completed the first four years of post-secondary education before 2021. If the educational institution has awarded the student four years of academic credit at that institution for post-secondary coursework, the student completed before 2021. Disregard any academic credit awarded solely on the basis of the student's performance on proficiency examination. So it doesn't, you can't just take a test that doesn't count for this purposes. If you check no, go to line 26. If you check yes, the student isn't eligible for the American Opportunity Credit. Skip line 26 through 30 and go to 31. Line 26. Check yes, if the student was convicted before the end of 2021 of a federal or state felony for possession of distribution of controlled substances. If you checked no, complete line 27 through 30 for this student. If you checked yes, the student isn't eligible for the American Opportunity Credit. Skip line 26 through 30 and go to line 31. Caution. You cannot claim the American Opportunity Credit and the lifetime learning credit for the same student in the same year. That's the point. We're going through the questionnaire for the differences between the American Opportunity Credit and lifetime learning credit to help us determine which one we can apply the expenses for that particular person that was a student to. So if you complete lines 27 through 30 for this student, don't complete line 31 American Opportunity Credit line 27. Enter the students adjusted qualified education expenses for line 27. So line 27 here, then this first one, if we qualified for the American Opportunity Credit, then we've got the adjusted qualified education expenses, but they can't go over 4,000 because that's where the credit kind of maxes out at. So it caps it off at the 4,000 there. So we're going to say, okay, and then use the adjusted qualified education expenses worksheet later to figure each student's adjusted qualified education expenses. Don't enter more than 4,000. Enter the total of all amounts from all part three line 30 on part one line one. So then all this stuff from part three then is going to be rolling over if I had multiple people up top here goes into line one on the following page for the refundable American Opportunity Credit if we qualify for the American Opportunity Credit. So lifetime learning credit. So enter the students adjusted qualified education expenses on line 31 C qualification expenses. So if we don't qualify for the American Opportunity like Sam didn't hear he he he qualifies then possibly then for the lifetime learning credit down here. So then we've got our amount down there. So then using the adjusted qualified education expenses worksheet next to the figure each students adjusted qualified education expenses enter the total of all the amounts from part three line 31 on part two line 10. So now we're going to take all the people that qualify for the lifetime learning and take all the line 31 from part three for it and put that into page one. But part two for the non refundable area in line 10, which says after completing part three for each student entered the total of all amounts from all part three line 31. So then we have that. So then adjusted qualified education expenses worksheet C qualified educational expenses earlier before completing complete a separate worksheet for each student for each academic period beginning or treated as beginning C below in 2021 for which you paid or are treated as having paid qualified education expenses for 2021. So most of this hopefully you would get from the 1098 T from the institution, but it might be a little bit more complex than that. So you got the total educational expenses paid for or on behalf of student in 2021 less tax free educational assistance received in 2021 allocated to the academic period tax free educational assistance received in 2022. And before you file your 2021 tax return allocable to the academic period refunds of qualified educational expenses paid in 2021. If the refund is received in 2021 or in 2022 before you file your 2021 tax return three total adjustments and then the adjusted qualified education expenses subtract line three from line one if zero or less enter zero caution. If you're claiming an education credit for more than one student complete a separate part three for each student before returning to page one to complete part one and two if any qualified education expenses for the student were paid in 2021 for an academic period beginning in the first three months of 2022 treat that academic period as if it begun in 2021 student student qualifications and periods expenses earlier. Hopefully that information will be properly calculated for you on the 1098 T but you might want to make sure asking the financial institution I mean the educational institution if that is indeed the case.