Who Can Claim the Lifetime Learning Credit?
Determine your eligibility for the Lifetime Learning Credit. This guide clarifies the intersecting requirements for the taxpayer, student, and education expenses.
The Lifetime Learning Credit (LLC) is a federal tax benefit designed to help pay for a wide range of postsecondary education. It is available for undergraduate, graduate, and professional degree courses, including classes taken to acquire or improve job skills. Unlike some other education credits, there is no limit on the number of years the LLC can be claimed. The credit is calculated as 20 percent of the first $10,000 in qualified education expenses, making the maximum credit $2,000 per tax return. This credit is non-refundable, which means it can reduce a taxpayer’s liability to zero, but no portion of the credit will be issued as a refund.
Taxpayer Eligibility Requirements
A taxpayer’s ability to claim the Lifetime Learning Credit depends on their income, which the IRS measures using Modified Adjusted Gross Income (MAGI). For the 2024 and 2025 tax years, the credit begins to phase out for single filers with a MAGI between $80,000 and $90,000. For those married filing a joint return, this phase-out range is between $160,000 and $180,000. Taxpayers with a MAGI above these ranges cannot claim the credit.
The amount of the credit is gradually reduced for taxpayers whose income falls within these phase-out ranges. This means an individual will not receive the full credit if their MAGI exceeds the lower threshold for their filing status.
Filing status is another requirement. A taxpayer using the married filing separately status is prohibited from claiming the Lifetime Learning Credit. To claim the credit, a married couple must file a joint tax return.
An individual cannot claim the Lifetime Learning Credit if they can be claimed as a dependent on another person’s tax return. For instance, if a college student is claimed as a dependent by their parents, the student cannot claim the LLC. In that scenario, only the parents who claim the student as a dependent may be able to claim the credit, provided they paid the education expenses and meet all other requirements.
Student and Educational Institution Qualifications
For expenses to qualify for the Lifetime Learning Credit, they must be for an eligible student. An eligible student can be the taxpayer, the taxpayer’s spouse, or a dependent that the taxpayer claims on their return. The credit is limited to one per tax return, not per student. If a taxpayer has multiple dependents attending school, the maximum credit for the year does not increase.
The student must be taking courses at an eligible educational institution. This category includes most accredited public, non-profit, and proprietary postsecondary schools, such as colleges, universities, and vocational schools. The defining factor is the institution’s eligibility to participate in a student aid program administered by the U.S. Department of Education.
The student must be enrolled for at least one academic period beginning in the tax year. An academic period is defined by the school and can include semesters, trimesters, or quarters. The purpose of the coursework must be to obtain a degree or another recognized education credential, or to acquire or improve job skills. This flexibility makes the credit useful for individuals pursuing continuing education.
Defining Qualified Education Expenses
Qualified education expenses are narrowly defined as tuition and fees required for enrollment or attendance at an eligible educational institution. These are the specific costs that can be used to calculate the credit for courses aimed at acquiring or improving job skills.
Many costs associated with higher education are excluded from the definition of qualified expenses. Funds used from tax-free sources, such as scholarships, grants, or distributions from a 529 plan, cannot be counted. Non-qualifying expenses include:
- Room and board
- Insurance
- Student health fees (unless required for enrollment)
- Transportation
- Other personal or living expenses
How to Claim the Lifetime Learning Credit
To claim the Lifetime Learning Credit, taxpayers must file specific forms with their annual tax return. The document needed from the educational institution is Form 1098-T, Tuition Statement. This form reports the amount of qualified tuition and related expenses paid during the year and is used to substantiate the expenses claimed.
The credit itself is calculated on IRS Form 8863, Education Credits. The taxpayer will use their records of qualified expenses, often verified by Form 1098-T, to complete Part III of this form, which is designated for the Lifetime Learning Credit. This part of the form walks the filer through the calculation, including any income-based limitations.
Once the allowable credit amount is determined on Form 8863, the result is transferred to Schedule 3 (Form 1040). The credit then reduces the taxpayer’s total tax liability. The completed Form 8863 must be submitted along with the taxpayer’s Form 1040.