Lifetime Learning Tax Credit

The Lifetime Learning Credit is a federal tax credit for higher education expenses.

Education Requirements
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.

Unlike the Hope Credit, however, there is just one Lifetime Learning Credit allowed per family (that is, per tax return).

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.)

Lifetime Learning Credit Restrictions
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 determined
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 claim 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.

Relevant IRS Forms

  • 1098-T: Your accredited school should send you one in early February. The 1098-T tells the IRS what the school billed you, payments they received from you, and other details related to your enrollment.
  • 8863: To calculate your education tax credit and report it on your 1040.

Read all the terms and conditions related to IRS education tax breaks
For complete, detailed explanations of “qualified expenses,” “eligible school,” “academic period,” allowable “funding sources,” and “Midwestern disaster areas,” carefully read all the information on the IRS 2008 Tax Benefits for Education web site.

Source: U.S. Internal Revenue Service

Please note: This article is intended to be a general overview of an education tax benefit for the tax year 2008. EducationGrant.com does 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 theIRS website for more information and to seek professional tax advice for personal income tax questions and assistance.