What Is the Lifetime Learning Tax Credit?

Kelly Hernandez
A piggy bank with a graduation cap on sitting atop some school books, next to some word blocks displaying the words "education costs."

The Lifetime Learning Credit (LLC), is also often referred to as the continuing education tax credit because it provides a tax credit for secondary education expenses. You or a dependent you claim on your tax return may qualify for this tax credit if you paid for tuition or other qualifying education-related expenses at an eligible educational institution throughout the year.

To claim this credit when filing your taxes with the Internal Revenue Service (IRS), you must have a tuition statement that confirms you obtained continuing education in the past year and that claims the expenses you paid for this education. This continuing education may have been attended to help you acquire a new job or improve your current job skills.

The LLC is different than the American Opportunity Tax Credit (AOTC) because it’s offered at any level of secondary education. Income restrictions for the lifelong learning credit are also different than they are for the AOTC. Since you cannot legally file for both the AOTC and the LLC in the same year, it’s important to understand the qualifications before you choose which credit you’re eligible for.

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How Much Is the Credit Worth?

The maximum lifetime learning credit offered through the IRS is up to $2,000 per tax return, which is 20% of the first $10,000 of qualified education expenses you incur. You may receive less than this maximum tax credit if you didn’t have enough qualifying expenses or if your income is above a certain threshold.

It’s important to note that the LLC is a tax credit and not a tax refund. If you file for the continuing education tax credit and you qualify to receive some or all of the credit, the amount of taxes you owe will be diminished by the amount of credit you’re eligible to receive. However, if you don’t owe any taxes this year, you won’t be provided with a refund for the amount of the credit you qualify for.

For example, say you owe $1,000 in taxes and you qualify for the full $2,000 LLC tax credit. The IRS will eliminate the $1,000 in taxes you owe, but you won’t get a refund for the additional $1,000. The credit doesn’t act as a refund and can only be used to decrease the amount of taxes you owe the IRS. Once your tax liability is reduced to $0, the remainder of the credit, if any, is null and void.

Who Is Eligible for the LLC?

There are specific lifetime credit requirements you or your dependent must meet to claim the credit on your taxes. You cannot claim the tax credit if you’re paying for educational expenses for someone you don’t claim as a dependent on your taxes. You also can’t claim the continuing education tax credit if you’re married but filing a separate tax return. If you’re a non-resident alien, you can’t claim the credit if you don’t elect to be treated as a resident alien for tax purposes.

To be eligible for the LLC, the student you claim on your taxes as a dependent must be enrolled or taking courses at an eligible secondary education institution with the goal of obtaining a degree or other educational credentials to get a job or improve job skills. He or she must also be enrolled for at least one academic period at the beginning of the tax year. This may include a semester, trimester, quarter, or summer school session.

Additionally, the educational institution and the expenses you claim must also be eligible to successfully file for this credit. Eligible educational institutions include accredited public, nonprofit, and privately-owned, for-profit post-secondary institutions. This includes any eligible type of:

  • College.
  • University.
  • Trade school.
  • Vocational school.

The lifetime learning credit expenses you claim must qualify in order to be eligible for the credit. You can claim any tuition you paid or other fees required to attend school, such as student body or registration fees. However, unlike some college savings plans, you cannot claim as valid expenses:

  • Room and board.
  • Supplies.
  • Transportation.
  • Living expenses.
  • Books.
  • Equipment.
  • Insurance.
  • Health fees.

Are There Income Limits for the LLC?

The lifetime learning credit you’re eligible for is reduced if your modified adjusted gross income (MAGI) is above certain income limits. If you want to claim the LLC in 2019 and you’re married and filing jointly, your MAGI must be at or below $116,000 to receive the full tax credit. If you file your taxes as a single person or as the head of your household, your MAGI must be at or below $58,000 or your credit will be reduced.

The higher your income within the eligible income brackets, the greater the reduction in the tax credit you’re qualified to receive. If your MAGI exceeds $68,000 as a single filer or $136,000 as a joint filer, you’re not eligible to claim the LLC at all.

How to Claim the LLC

To be eligible for the lifetime education tax credit, you or your dependent must have a Form 1098-T (Tuition Statement) from the educational institution that was attended. Box 1 on this form shows the amount you paid the school, but this total may include additional expenses that don’t qualify with the LLC. You may need to deduct any expenses you paid that don’t meet the LLC’s eligibility guidelines before using this number to claim the tax credit.

Once you’ve calculated the eligible lifetime learning credit expenses you can claim, you must complete IRS Form 8863. You’ll need to fill in all areas of the form that apply to you and the LLC. However, when you complete Part III of the form, you’ll have a better understanding of the tax credit you may be eligible to receive.

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