The Kentucky Education Tuition Tax Credit, claimed through Form 8863-K, helps eligible taxpayers reduce their state tax liability by offering credits for qualified undergraduate education expenses paid to eligible postsecondary institutions physically located within the Commonwealth of Kentucky. This credit mirrors federal education credits like the American Opportunity Credit and Lifetime Learning Credit but applies only to Kentucky-based institutions and undergraduate studies, requiring taxpayers to first qualify for the corresponding federal credits on Form 8863, which must be attached. Taxpayers cannot claim this credit if they opted for the federal tuition and fees deduction instead, and it supports filing statuses of single, married filing separately on a combined return, or married filing jointly. The credit equals 25% of the allowable federal credit amount, capped at $625 per student for the American Opportunity Credit and $500 per return for the Lifetime Learning Credit, with unused portions carried forward up to five years. Qualified expenses include tuition, fees, and course materials as defined by federal rules, limited to $4,000 per student for American Opportunity calculations and $10,000 total for Lifetime Learning, ensuring the credit directly offsets Kentucky tentative tax after accounting for prior-year carryforwards. Enclose the completed form with Form 740 or Form 740-NP, making it essential for Kentucky residents funding higher education at local accredited public, nonprofit, or private colleges, universities, vocational schools, or other institutions eligible for U.S. Department of Education student aid programs.
How to File Form 8863-K
Complete Form 8863-K after preparing your federal Form 8863 and Kentucky individual income tax return (Form 740 or 740-NP). Attach your federal Form 8863 to this form, then enclose the entire package with your Kentucky tax return. Claim the allowable credit amount from line 17 on Form 740 or 740-NP, line 23. If you have unused credit, calculate carryforwards using Part V and retain records for future years. Mail or e-file by the due date of your Kentucky return, typically April 15 unless extended.
How to Complete Kentucky Form 8863-K
Part I: Qualifications
Are all expenses claimed on this form for an eligible educational institution located within the Commonwealth of Kentucky (Kentucky institution)?
Check Yes or No. Expenses must be for a physically located Kentucky postsecondary institution eligible for U.S. Department of Education student aid.
Are all of the expenses claimed on this form for undergraduate studies?
Check Yes or No. Only undergraduate expenses qualify for this credit.
Is your Kentucky filing status single; married filing separately on a combined return; or married filing a joint return?
Check Yes or No. Other filing statuses do not qualify.
If you answered No to any question, stop here. You do not qualify. If Yes to all, continue to Part II.
Identifying Information
Enter name(s) as shown on Form 740 or Form 740-NP, page 1.
Write the exact name from your Kentucky tax return.
Your Social Security Number
Enter your SSN.
Part II: American Opportunity Credit (List only expenses for undergraduate studies from Kentucky institutions)
Column (a) Student Name (Line 1)
Enter the full name of each qualifying student.
Column (b) SSN (Line 1)
Enter the student’s Social Security Number.
Column (b) Institution Name and Address (Line 1)
Provide the full name and address of the Kentucky institution.
(c) Qualified Expenses (see instructions). Do not enter more than $4,000 for each student. (Line 1)
Enter qualified tuition, fees, and course materials, not exceeding $4,000 per student.
(d) Subtract $2,000 from column (c); if zero or less enter -0- (Line 1)
Subtract $2,000 from column (c) amount. Enter 0 if result is zero or negative.
(e) Multiply column (d) by 25% (.25) (Line 1)
Multiply column (d) by 0.25 and enter the result.
(f) If column (d) is zero enter the amount from column (c); otherwise, add $2,000 to column (e) and enter result (Line 1)
If column (d) is zero, copy column (c). Otherwise, add $2,000 to column (e).
Line 2: Add the amounts on line 1, column (f)
Total column (f) across all students on line 1 and enter here.
Line 3: Enter the decimal amount from line 6 of the federal Form 8863
Copy the decimal from federal Form 8863, line 6. Enter 0 if blank, then skip to line 4. No American Opportunity Credit allowed.
Line 4: Tentative American Opportunity Credit
Multiply line 2 by line 3. Result cannot exceed federal Form 8863, line 7. If claiming Lifetime Learning Credit for another student, complete Part III first. Otherwise, carry to line 11.
Part III: Lifetime Learning Credit (List only expenses for undergraduate studies from Kentucky institutions)
Column (a) Student Name (Line 5)
Enter the full name of each qualifying student.
Column (b) Student SSN (Line 5)
Enter the student’s Social Security Number.
Column (c) Name and Address of Kentucky Institution (Line 5)
Provide the full name and address of the Kentucky institution.
Column (d) Qualified Expenses (See instructions) (Line 5)
Enter qualified expenses per federal rules.
Line 6: Add the amounts on line 5, column (d) and enter total here
Total column (d) across all students on line 5.
Line 7: Enter the smaller of line 6 or $10,000
Enter the lesser of line 6 or 10,000.
Line 8: Multiply line 7 by 20% (.20) and enter here
Multiply line 7 by 0.20.
Line 9: Enter the decimal amount from line 17 of the federal Form 8863
Copy from federal Form 8863, line 17. Enter 0 if blank, then skip to line 10. No Lifetime Learning Credit allowed.
Line 10: Tentative Lifetime Learning Credit
Multiply line 8 by line 9. Result cannot exceed federal Form 8863, line 18.
Line 11: Total Tentative Kentucky Education Tuition Tax Credits. Add lines 4 and 10
Add lines 4 and 10.
Part IV: Allowable Education Credits
Line 12: Multiply the amount on line 11 by 25% (.25) and enter total here
Multiply line 11 by 0.25 for tentative Kentucky credit.
Line 13: Enter tentative tax from Form 740 or Form 740-NP, line 22
Copy tentative tax from your Kentucky return, line 22.
Line 14: Enter amount from Part V, line 34
Copy from Part V, line 34. Enter 0 if blank.
Line 15: Subtract line 14 from line 13
Subtract line 14 from line 13.
Line 16: Enter the smaller of line 15 or line 12
Enter the lesser amount.
Line 17: Add lines 14 and 16
Add lines 14 and 16. Carry this to Form 740 or 740-NP, line 23 as your allowable 2025 credit.
Line 18: If line 15 is smaller than line 12, subtract line 15 from line 12
If applicable, calculate unused credit for 2025 carryforward to 2026. Enter on 2025 Carryforward Worksheet, Line E.
Part V: Credit Carryforward from Prior Years
Line 19: Enter tentative tax from Form 740 or Form 740-NP, page 1, line 22
Copy tentative tax from current-year return.
Line 20: Enter your credit carryforward from 2020
Enter amount carried from 2020 Form 8863-K.
Line 21: Enter your credit carryforward from 2021
Enter amount carried from 2021 Form 8863-K.
Line 22: Enter your credit carryforward from 2022
Enter amount carried from 2022 Form 8863-K.
Line 23: Enter your credit carryforward from 2023
Enter amount carried from 2023 Form 8863-K.
Line 24: Enter your credit carryforward from 2024
Enter amount carried from 2024 Form 8863-K.
Line 25: Add lines 20 through 24 and enter total here
Total all prior carryforwards.
Line 26: Subtract line 20 from line 19
Subtract line 20 from line 19. Enter 0 if zero or less.
Line 27: Enter 2021 credit carryforward to 2026
Subtract line 26 from line 21. Enter 0 if zero or less.
Line 28: Subtract line 21 from line 26
Subtract line 21 from line 26. Enter 0 if zero or less.
Line 29: Enter 2022 credit carryforward to 2026
Subtract line 28 from line 22. Enter 0 if zero or less.
Line 30: Subtract line 22 from line 28
Subtract line 22 from line 28. Enter 0 if zero or less.
Line 31: Enter 2023 credit carryforward to 2026
Subtract line 30 from line 23. Enter 0 if zero or less.
Line 32: Subtract line 23 from line 30
Subtract line 23 from line 30. Enter 0 if zero or less.
Line 33: Enter 2024 credit carryforward to 2026
Subtract line 32 from line 24. Enter 0 if zero or less.
Line 34: Enter the smaller of line 19 or line 25
Enter lesser amount. Carry to Part IV, line 14.
Carryforward Worksheet 2026
A: From Part V, Line 27, 2021 to 2026
Enter line 27 amount for records.
B: From Part V, Line 29, 2022 to 2026
Enter line 29 amount for records.
C: From Part V, Line 31, 2023 to 2026
Enter line 31 amount for records.
D: From Part V, Line 33, 2024 to 2026
Enter line 33 amount for records.
E: From Part IV, Line 18, 2025 to 2026
Enter line 18 amount for records. Retain this worksheet or prior Forms 8863-K for future returns.