The Lifetime Learning Credit

Resources:

Why YOU Should Care:

If you qualify, you may be able to claim a credit of $2,000 for qualified education expenses on your tax return.


What is it?

The Lifetime Learning Credit allows you to claim a credit of up to $2,000 for qualified education expenses per eligible student. A credit is something that directly reduces the amount of taxes you owe.

You can only use the same student’s qualified education expenses for one credit or deduction each year. This means that if you take the Lifetime Learning Credit, you cannot also use these qualified expenses to claim the American Opportunity Tax Credit or the Tuition and Fees deduction in the same year.

How is this different from the American Opportunity Tax Credit?

Unlike the AOTC, the Lifetime Learning Credit is not limited to the first four years of post-secondary education. This means that you may be able to claim it for your graduate degree or a second bachelor’s degree obtained after the completion of the first. Additionally, a felony drug conviction does not make a student ineligible for this credit, as it does for the AOTC.

Who is an eligible student?

The student must be enrolled in a course as part of a degree program or to acquire or improve job skills.

If the eligible student is the dependent of another taxpayer (e.g., his or her parents), the credit can be claimed on the parents’ return or the dependent’s return, but not both. An eligible student claiming the credit on his or her own return must not be filing under the Married Filing Separately status.

Which expenses qualify?

  • Tuition
  • Enrollment Fees
  • Course Materials (e.g., books, supplies, equipment)

Each qualifying student should receive a Form 1098-T from the educational institution listing the qualified expenses. If there are additional expenses not listed on the Form 1098-T, you must retain documentation supporting the expense.

Which expenses do NOT qualify?

  • Room and Board
  • Transportation
  • Health Insurance and Medical Expenses
  • Student Fees (unless required for enrollment)

You are also prohibited from including any expenses covered by a separate credit or reimbursement program or scholarship. Additionally, if you withdraw from a course and obtain a refund, those expenses do not count.

How do I claim the credit?

The amount of the credit for which you qualify is limited by the amount of your modified adjusted gross income (MAGI). For 2013, those limits are listed below. These limits are adjusted annually and may increase for 2014. As of publishing, the 2014 rates are not available.

  • If your MAGI is less than $53,000 for a Single taxpayer or $107,000 for taxpayers filing Married Filing Jointly, you may be eligible for the full credit of $2,000.
  • If your MAGI is between $53,001 and $63,000 for a Single taxpayer or between $107,001 and $127,000 for taxpayers filing Married Filing Jointly, you may be eligible for a reduced credit.
  • You cannot claim the credit if your MAGI is over $63,001 for a Single taxpayer or $127,001 for taxpayers filing Married Filing Jointly.

You claim the credit by completing and filing Form 8863 with your annual tax return.

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