You can claim the Lifetime Learning credit if you, your spouse, or any of your dependents are enrolled at an eligible educational institution and responsible for paying those college costs. The credit can help pay for undergraduate, graduate, and professional degree courses, as well as those courses to acquire or improve job skills.
The Lifetime Learning tax credit is equal to 20% of the first $10,000 in tuition expenses you pay per year, up to a maximum credit of $2,000, regardless of the number of individuals for whom you paid qualified education expenses.
$10,000 is the collective cap. You can't claim a credit for each student.
The Lifetime Learning credit isn't restricted to the first four years of undergraduate enrollment, and the student doesn't necessarily have to attend full time. This means you might still be eligible if you took only one class.
Eligible Educational Institutions
All accredited colleges, universities, vocational schools, and other post-secondary institutions qualify as eligible educational institutions with this credit. 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.
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 reduce your qualifying expenses by the amount of any financial assistance received from grants, scholarships, or reimbursements. Still, you don't have to reduce them if you pay college tuition using borrowed funds. This borrowing includes student loans or gifts from family members.
Who Can Claim the Education Credits?
If you have a dependent and the dependent is going to college—and you're the one paying for it—you can claim the education credit on your tax return. If your dependent is paying for their education themselves, they can claim education credits on their tax return—unless you claim them as a dependent.
You can't claim the Lifetime Learning credit if you pay college expenses for someone who isn't your dependent, and you can't claim it if you're married but filing a separate tax return. Non-resident aliens can't claim the credit if they don't elect to be treated as resident aliens for tax purposes, according to the IRS.
The amount of the Lifetime Learning credit you can claim begins to phase out at certain income limits. Your tax credit amount 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 more.
MAGI thresholds for tax year 2021, the taxes you will pay in 2022, are $80,000 or less for single or head-of-household filers, and $160,000 or less for people married and filing jointly. If your MAGI is over $80,000 but less than $90,000, (over $160,000 but less than $180,000 for married taxpayers filing jointly), your credit is reduced. If your MAGI is over $90,000 ($180,000 for married taxpayers filing joint), you can't claim the credit.
Claiming the Lifetime Learning Credit
Claiming the Lifetime Learning credit requires filing IRS Form 8863 with your tax return. Completing Parts III and IV of this form will help you figure out the amount of credit you can claim.
Tax laws change periodically and you should always consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and it is not a substitute for tax advice.
Lifetime Learning Credit vs. American Opportunity Tax Credit
The Lifetime Learning credit and the American Opportunity credit both lessen the financial burden of educational costs. The American Opportunity tax credit is restricted to the first four years of undergraduate classes, though, while 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 can often be greater, so taxpayers typically only claim the Lifetime Learning credit when they cannot claim the American Opportunity credit due to its enrollment restrictions.
You can't claim both the Lifetime Learning credit and the American Opportunity credit for the same student in the same year. However, you can claim the Lifetime Learning credit for one student and the American Opportunity credit for another.
Up to 40% of the American Opportunity credit is refundable up to $1,000. If you have any credit left over after it reduces your tax owed to zero, you'll receive a refund for up to 40% of the total credit. 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.
The American Opportunity credit is primarily geared toward four-year degree programs. The student must also have no felony drug convictions. Having a felony conviction also does not preclude a student from qualifying for the Lifetime Learning credit.
Frequently Asked Questions (FAQs)
How many times can you claim the Lifetime Learning credit?
Unlike the American Opportunity credit, there is no limit on the number of times someone can claim the Lifetime Learning credit. Someone can claim it as many years as they have qualified expenses.
Where does the Lifetime Learning credit go on Form 1040?
The Lifetime Learning credit goes on line 29 of Form 1040 alongside all other Form 8863 credits like the American Opportunity credit.