The lifetime learning credit can save students or their families up to $2,000 per year on their taxes.
The credit is equal to 20% of your family's out-of-pocket qualified education expenses, for up to $10,000 of expenses. Qualified education expenses include tuition and other mandatory fees paid directly to schools, but do not include room and board, insurance, student health fees, transportation, or other personal expenses.
To be eligible, students must be taking course work at a post-secondary school. There is no requirement that students be enrolled full or half time. Taking even a single course is enough. In addition, there is no requirement that students be in their first two years of post-secondary education -- students are eligible through graduate school. Students also do not need to be pursuing a degree or other credential -- courses taken to acquire or improve job skills are okay.
The taxpayer who pays the student's expenses is the one who can claim the credit. That taxpayer can be (1) the student him- or herself, provided that the student is not claimed as a dependent on anyone else's tax return, or (2) the student's spouse, or (3) a person, such as a parent, who claims the student as a dependent.
The student must be attending a school that qualifies for federal student. The school may be a college, university, vocational school, or other post-secondary educational institution. Almost all accredited schools within the United States will qualify.
You may claim the credit based on qualified education expenses paid with the proceeds of a student loan. You claim the credit for the year in which you paid the education expenses, not the year in which you repay the loan.
There is no limit to the number of years that you can claim the lifetime learning credit. However, you can not claim a credit greater than $2,000 per year, no matter how many students are in your family. Also, you may not take both the lifetime learning credit and the Hope credit in the same year for the same student.
Because this is a tax credit, rather than a deduction, your taxes will be reduced by the full amount of the credit. However, the credit is nonrefundable, which means that you can not claim a credit for more than the amount of your taxes.
You cannot take the credit if you are married filing separately, or if your modified adjusted gross income is greater than $51,000 (for single taxpayers) or $103,000 (for married filing jointly taxpayers). If your modified adjusted gross income is between $41,000 and $51,000 (single taxpayers) or between $83,000 and $103,000 (married filing jointly taxpayers), the credit will be reduced.
To claim the credit, you must file Form 8863 and attach it to your 1040 or 1040A.
For more information before claiming, see IRS Publication 970, available online or from an IRS office, or inquire at a college or vocational school financial aid office.
