Who Qualifies for the Lifetime Learning Credit (LLC)?
Understand the tax provisions for the Lifetime Learning Credit, a non-refundable credit for undergraduate, graduate, and job skill development courses.
The Lifetime Learning Credit (LLC) is a non-refundable tax credit for qualified tuition and related expenses. This credit assists with the costs of undergraduate, graduate, and professional degree courses, as well as courses taken to acquire or improve job skills. The LLC can be claimed for an unlimited number of years, offering sustained support for ongoing education.
Determining Your Eligibility
Taxpayer Requirements
To claim the Lifetime Learning Credit, a taxpayer must meet specific filing requirements. The credit cannot be claimed by those using the married filing separately status. A taxpayer also cannot be claimed as a dependent on another person’s tax return; if a parent claims their child as a dependent, only the parent can claim the LLC based on that child’s expenses.
Eligible Student
The student can be the taxpayer, their spouse, or a dependent for whom they claim an exemption. The student is not required to be pursuing a degree or be enrolled at least half-time, as long as the courses are taken to acquire or improve job skills. The student must be taking courses at an eligible educational institution for at least one academic period beginning in the tax year.
Eligible Educational Institution
An eligible educational institution includes colleges, universities, vocational schools, and other postsecondary institutions eligible to participate in a student aid program administered by the U.S. Department of Education. This includes most accredited public, private, and for-profit postsecondary schools. A taxpayer cannot claim both the LLC and the American Opportunity Tax Credit for the same student in the same tax year.
Identifying Qualified Education Expenses
Qualified education expenses for the Lifetime Learning Credit are tuition and fees required for enrollment or attendance at an eligible educational institution. These are funds paid directly to the school for instruction. For a course to qualify, it must be part of a post-high school degree program or taken to acquire job-related skills.
Certain costs are excluded from qualified expenses, including room and board, transportation, and insurance. Personal living expenses and supplies like books or equipment do not qualify unless they are required to be paid to the institution as a condition of enrollment or attendance.
Educational institutions issue Form 1098-T, Tuition Statement, which reports payments received for qualified tuition and related expenses. While this form is a primary document, the amount shown is a starting point. The taxpayer is responsible for reviewing their financial records to ensure they only claim expenses that meet the IRS definition.
Calculating the Credit Amount
The credit is worth 20% of the first $10,000 in qualified education expenses paid for all eligible students on the tax return, for a maximum of $2,000 per return. This $2,000 limit applies regardless of the number of students with qualifying expenses; it is a per-return limit, not a per-student limit.
A taxpayer’s ability to claim the full credit is subject to income limitations based on their Modified Adjusted Gross Income (MAGI). The credit amount begins to decrease for single filers with a MAGI between $80,000 and $90,000. For those who are married and filing a joint return, this phase-out range is between $160,000 and $180,000. Taxpayers with a MAGI above $90,000 (or $180,000 for joint filers) cannot claim the credit.
The LLC is a non-refundable credit, which means it can reduce a taxpayer’s tax liability to zero, but no portion of the credit will be returned as a refund. If the calculated credit is more than the tax owed, the excess is not paid out. For instance, if a taxpayer owes $1,500 in taxes and qualifies for a $2,000 LLC, their tax bill is reduced to zero, but they do not receive the remaining $500.
How to Claim the Lifetime Learning Credit
To claim the Lifetime Learning Credit, a taxpayer must complete and attach IRS Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to their Form 1040 tax return. The taxpayer will need the student’s Form 1098-T, Tuition Statement, to help complete the form.
Part III of Form 8863 is designated specifically for the Lifetime Learning Credit. Here, the taxpayer will enter the student’s name and taxpayer identification number, along with the total amount of adjusted qualified education expenses. The form guides the taxpayer through the calculation, including the application of the 20% rate and the income limitations.
Once the credit amount is calculated on Form 8863, the final figure is transferred to Schedule 3 (Form 1040), Additional Credits and Payments. This schedule consolidates various non-refundable credits before the total is carried over to the main Form 1040.