Lifetime Learning Credit: Federal Tax Credit for College Students
The Lifetime Learning Credit is one of two federal tax credits that allow students to get money back on their college expenses from the government at income tax time.
Lifetime Learning Credit Education Qualifications
The Lifetime Learning Credit has fewer education restrictions than the Hope Credit.
- Any student paying qualified tuition and related expenses at an authorized postsecondary education institution is eligible. The student can be you, your spouse, or a dependent child.
- The education expenses are not restricted to undergraduate programs. Graduate and continuing education programs are also eligible.
- The half-time enrollment minimum does not apply. Even one course is enough to qualify for the credit.
- Eligibility is not restricted to the first two years of school. You can claim a Lifetime Learning Credit every year you're in school.
However, only one Lifetime Learning Credit is allowed per family.
Lifetime Learning Credit Amount
For 2008, the maximum amount of the Lifetime Learning Credit is $2,000 per tax return. (Note: For students in certain Midwestern disaster areas, the credit is $4,000 per family. Designated Midwestern disaster areas include counties in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin.)
Not Everyone Can Get the Maximum Lifetime Learning Credit
The Lifetime Learning Credit is reserved for taxpayers whose Modified Adjusted Gross Income (MAGI) is $58,000 or less ($116,000 or less if you file a joint return). The credit is reduced on a sliding scale for MAGIs between $48,000 and $58,000. Also, this credit is nonrefundable, which means that it can reduce the income tax you owe to zero, but if the credit turns out to be more than all the tax owed, you don't get the difference refunded to you.
How the Lifetime Learning Credit is Calculated
If you're a student on a single-filer tax return for a MAGI under $48,000 ($96,000 for a jointly-filed return), the filer can claim a credit for up to 20% of the first $10,000 of qualified education expenses paid for all eligible students in the family. For a MAGI between $48,000 and $58,000, there are instructions on the IRS form for figuring out the correct sliding-scale credit. "Qualified expenses" include tuition, fees, and certain other education costs."Qualified expenses" include tuition, fees, and certain other education costs.
How to get the Lifetime Learning Credit.
You claim the Lifetime Learning credit by completing Parts II and III of Form 8863 and submitting it with the tax return filer's Form 1040 or 1040A. The filer can be you, your spouse if you file jointly, or your parent if you're being claimed as a dependent.
Comparing the Hope Credit and the Lifetime Learning Credit
| Hope Credit | Lifetime Learning Credit |
|---|---|
| Up to $1,800 credit per eligible student per year | Up to $2,000 credit per tax return |
| Can only be used for the first 2 years of college or vocational school | Available for all years of postsecondary education and for courses to acquire or improve job skills |
| No more than a total of 2 years per eligible student | Available for an unlimited number of years |
| Student must be pursuing an undergraduate degree or other recognized education credential | Student does not need to be pursuing a degree or other recognized education credential |
| Student must be enrolled at least half time for at least one academic period beginning during the year | Enrollment in at least one course qualifies for the credit |
| No felony drug conviction on student's record | Felony drug conviction rule does not apply |
Source: U.S. Internal Revenue Service, IRS online
Please note: This article is intended to be a general overview of education tax benefits for the tax year 2008. Course Advisor Inc. and CourseAdvisor.com do not advise on any personal income tax requirements or issues. Use of any information from this web site is for general information only and does not represent personal tax advice either express or implied. You are encouraged to visit the IRS website for more information and to seek professional tax advice for personal income tax questions and assistance.