Learn About the Lifetime Learning Tax Credit

This federal tax credit is worth up to $2,000

Students talking in class
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The Lifetime Learning Credit is a tax credit equal to 20 percent of the first $10,000 in tuition expenses you pay per year. The maximum credit is $2,000. You must have at least $10,000 in qualified expenses in a given year to claim the whole $2,000 credit. If you spend just $5,000, your credit would reduce to $1,000 or 20 percent of that amount.

You can claim the Lifetime Learning Credit if you, your spouse, or any of your dependents are enrolled at an eligible educational institution and you were responsible for paying those college costs. But $10,000 is the collective cap. It's not per student.

Unlike its sister credit, the American Opportunity Tax Credit, the Lifetime Learning credit is not restricted to the first four years of undergraduate classes. The student doesn't necessarily have to be enrolled full time. Even if you, your spouse, or your dependent took only one class, you might still be able to take advantage of this tax credit.

Having a felony conviction on his record does not preclude a student from qualifying for the Lifetime Learning Credit.

What's an Eligible Educational Institution?

All accredited colleges and universities qualify as eligible educational institutions. Vocational schools and other post-secondary institutions are also eligible. Basically, you can use tuition paid to the school for claiming the Lifetime Learning Credit if the learning institution is eligible to participate in federal student aid programs through the U.S. Department of Education.

What Are Qualified Expenses?

Qualifying expenses include amounts paid for tuition and any required fees such as registration and student body fees. They do not include books, supplies, equipment, room and board, insurance, student health fees, transportation, or living expenses.

You must be contractually on the hook for paying these tuition and fees—the bills come to you.

You must reduce your qualifying expenses by the amount of any financial assistance received from grants, scholarships, or reimbursements from your employer. You don't have to reduce your qualifying expenses if you paid for college tuition using borrowed funds. This includes student loans or gifts from family members.

Who Can Claim the Education Credits?

If your son or daughter is your dependent, is going to college, and if you're paying for it, you can claim the education credits on your tax return. If your child is no longer your dependent and she's paying for her education, she can claim education credits on her own tax return.

If you pay college expenses for someone who is not your dependent, you cannot claim these tax credits.

Income Limitations

The amount of the Lifetime Learning Credit is limited by a phase-out range. The amount of your tax credit isn't reduced if your modified adjusted gross income (MAGI) is below the phase-out limit, but it will be reduced if your income is in the middle of the phase-out range. You're not eligible at all if your income exceeds the phase-out range.

For the year 2018, the income phase-out begins at:

  • $57,000 for single or head of household filers
  • $114,000 for those who are married and filing jointly

For the year 2017, the income phase-out begins at:

  • $56,000 for single and head of household filers
  • $112,000 for those who file as head of household

For the year 2016, the income phase-out began at:

  • $55,000 for single or head of household filers
  • $110,000 for those who were married and filing jointly

For the year 2015, the income phase-out range began at:

  • $55,000 for single or head of household filers
  • $110,000 for those who were married and filing jointly

For the year 2014, the income phase-out range began at:

  • $54,000 for single or head of household filers
  • $108,000 for those who were married and filing jointly

Most taxpayers will find that their MAGIs are the same as their adjusted gross income (AGI).

Comparisons with Other Education-Related Tax Breaks

The tuition and fees tax deduction is similar to the Lifetime Learning Credit. Both these tax breaks are available to any student taking college classes or other post-secondary education, regardless of whether they're studying full or part time. But the Bipartisan Budget Act of 2018 only renewed the tuition and fees deduction retroactively through the end of 2018. It might or might not be available for the 2018 tax year.

You can't claim the Lifetime Learning Credit and the tuition and fees deduction as well, and you can't claim both the Lifetime Learning Credit and the American Opportunity Credit for the same student in the same year. You can claim the Lifetime Learning Credit for one student and the American Opportunity Credit for another student, however.

The American Opportunity Credit can often be greater so taxpayers typically only claim the Lifetime Learning Credit when they're unable to claim the American Opportunity Credit due to enrollment restrictions. The Lifetime Learning Credit is available for any level of post-secondary education—undergraduate, graduate, extension courses, or even vocational schools.

The American Opportunity Credit begins phasing out for single taxpayers with modified adjusted gross incomes of $80,000 as of 2018 and at $160,000 for married couples filing jointly. It's available for students or their parents over a larger income range compared to the Lifetime Learning Credit.

Up to 40 percent of the American Opportunity Credit is refundable. If you have any credit left over after it reduces your tax owed to zero, you'll receive a refund for this portion of it. The Lifetime Learning Credit isn't refundable. It can bring any tax you might owe down to zero, but the IRS will keep the rest.

How to Claim the Credit

Claiming either education tax credit requires filing IRS Form 8863 with your tax return. Completing this form will help you figure out the amount of credit you can claim. It's two pages, but if you're calculating and claiming the Lifetime Learning Credit you can skip Part I and go straight to Part II.