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Tax Tips – The Lifetime Learning Tax Credit

The lifetime learning tax credit is a $2,000 credit available for eligible education expenses paid for the tax year.  Unlike deductions, which only reduce the amount of income subject to tax, this credit reduces the amount of income tax due.  There is no limit on the number of years this credit can be claimed for eligible students.   There are income limits set for eligibility as well.  There is no refund available if this credit exceeds the tax due.

Who can claim the credit?

There are four requirements that must be met to claim this credit.  Following are the requirements:

  • Your modified adjusted gross income is less than $62,000 for an individual and less than $124,000 for a married couple filing jointly.
  • You paid qualified education expenses of higher education.
  • You paid the education expenses for an eligible student.
  • The eligible student is yourself, your spouse or a dependent for which you claim an exemption on your tax return.

If you took out a loan to pay for your education, you claim the credit for the year the education was paid, not the year the loan was repaid.

What type of education is required?

The credit is available for all years of postsecondary education and for courses to acquire or improve job skills at an eligible institution.  Expenses that qualify for the credit are tuition fees required for enrollment or attendance including any amount required to be paid to the institution for course-related books, supplies and equipment.  Eligible educational institutions are any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.

Who Can’t Claim the Credit?

There are certain factors that will make you ineligible for this credit.  You don’t qualify for the credit if any of the following apply:

  • Your filing status is married filing separately.
  • You’re listed as a dependent on another person’s tax return.
  • You’re modified adjusted gross income is $62,000 or more for an individual or $124,000 or more for a married couple filing jointly.
  • You or your spouses are a non-resident alien who didn’t request to be treated as a resident alien for tax purposes.
  • You claim the American Opportunity Credit or a Tuition and Fees Deduction for the same student.

You can obtain more specific information about non-resident aliens in IRS publication 519.

What is the academic period requirement?

The academic period is a semester, trimester, quarter, or other period of study as determined by an education institution.   If an institution uses only credit hours or clock hours and does not have academic periods, each payment period is treated like an academic period.   Students who withdraw from a class and don’t get refunded the tuition are allowed to claim this credit.

The lifetime learning tax credit is a credit up to $2,000 that a person can claim for eligible education expenses.  This credit will reduce the amount of tax you pay.  The credit is available for eligible students, and for individuals whose modified adjusted gross income is less than $62,000 or married couples filing jointly whose modified adjusted gross income is less than $124,000.  You won’t receive a refund if the credit is more than the income tax you owe.

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