How to Claim the Lifetime Learning Credit for Graduate School

The Lifetime Learning Credit, or LLC, is a nonrefundable tax credit for qualified tuition and related expenses paid for eligible students at an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses. It is a useful tool for those in graduate school, as other education credits are often restricted to the first four years of postsecondary education.

Determining Your Eligibility for the Credit

Student Enrollment

To qualify for the Lifetime Learning Credit, the student must be taking courses at an eligible educational institution to acquire job skills. Unlike other education credits, the LLC does not require the student to be pursuing a degree or certificate. A student also does not need to be enrolled at least half-time to be eligible for the credit.

Income Limitations

Your ability to claim the LLC is subject to income limitations based on your modified adjusted gross income (MAGI). For the 2025 tax year, the credit begins to phase out for single filers with a MAGI between $80,000 and $90,000. For those who are married and filing a joint return, the phase-out range is between $160,000 and $180,000.

Filing Status

You cannot claim the credit if your filing status is married filing separately. To be eligible, married individuals must file a joint tax return.

Dependency Status

You cannot claim the LLC for yourself if you are claimed as a dependent on another person’s tax return, such as a parent’s. In that situation, only the individual who claims the student as a dependent can claim the LLC based on the expenses they paid for the student.

Identifying Qualified Education Expenses

Definition of Qualified Expenses

Qualified education expenses are defined as tuition and fees required for enrollment or attendance at an eligible educational institution. The expenses must be paid for an academic period beginning in the tax year or the first three months of the next tax year.

Excluded Costs

Certain costs associated with graduate school are not qualified expenses for the LLC. These include:

• Room and board
• Transportation
• Insurance
• Student health fees, unless the fee is a condition of enrollment
• Personal living expenses, such as the cost of a computer unless the school requires it

The Role of Form 1098-T

Each year, students should receive a Form 1098-T, Tuition Statement, from their educational institution by January 31. This form reports the total amount of payments received for qualified tuition and related expenses in Box 1. The amount shown may not be the final figure you use, as it might include non-qualified fees or not reflect all adjustments.

Adjustments for Tax-Free Assistance

Your total qualified expenses must be reduced by any tax-free educational assistance you receive. This includes:

• Scholarships
• Fellowships
• Grants
• Employer-provided educational assistance

For example, if your qualified tuition was $12,000 and you received a $5,000 tax-free scholarship, your adjusted qualified expenses for the LLC calculation would be $7,000.

Calculating and Claiming the Credit

Calculating the Credit

The Lifetime Learning Credit is calculated as 20% of the first $10,000 of qualified education expenses. This means the maximum credit you can receive is $2,000 per tax return. This limit applies per return, not per student.

The LLC is a nonrefundable credit. This means the credit can reduce your tax liability to zero, but you will not receive any portion of it back as a refund if the credit amount exceeds your tax liability. For instance, if your tax liability is $1,500 and you qualify for a $2,000 LLC, the credit will reduce your tax to zero, but you will not get the remaining $500 back.

Filing with Form 8863

To claim the credit, you must complete and file Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). For the LLC, you will complete Part II of the form. This section requires you to enter the student’s name and Social Security number, the school’s information, and the final calculated amount of qualified expenses.

After calculating the tentative credit on Form 8863, you will use Part IV to determine if your MAGI reduces the amount of credit you can claim. The final credit amount from Form 8863 is then transferred to Schedule 3 (Form 1040). This completed form must be attached to your main Form 1040 tax return when you file.