This Tax Credit helps you lower the cost of pursuing a post-secondary education.
Taxpayers attending college may be eligible for the Lifetime Learning Tax Credit. This credit gives a dollar-for-dollar credit toward your tax liability, reducing the amount you may owe. It applies to the first $10,000 you pay in tuition and other qualified educational expenses.
How do you Qualify for It?
Qualifying for the Lifetime Learning Tax Credit is simple:
- You or a dependent must be enrolled in a post-secondary school; it doesn’t have to be toward a degree
- You must be taking the courses to obtain a degree, obtain a job in a certain sector, or receive any other educational credentials
- You must be enrolled at least one semester, trimester or any other academic period the institution uses
The Income Limits for the Lifetime Learning Tax Credit
Like most credits, there are income limits for the LLC. If your modified adjusted gross income is between $58,000 and $68,000 for single filers or $116,000 and $136,000 for married filing joint, your credit may be reduced or phased out. It is phased out at the highest levels ($68,000 for singles and $136,000 for joint), which means you can’t take the credit.
How do you Claim the Lifetime Learning Tax Credit?
If you are eligible, you should receive Form 1098-T from your educational institution by January 31. You need this statement to determine your credit.
- Use Form 1098-T to complete Form 8863
- Complete parts 3 and 6
- Move the credit to your 1040
- Include Form 8863 when you send in your tax returns
How do you Calculate How Much you Get?
The first $10,000 you spend on educational expenses is eligible for the credit. You may claim up to 20% of the amount spent (up to $10,000) or in other words, a maximum credit of $2,000.
Your $10,000 may include tuition, books, supplies or other fees required to pursue your education. It must be a condition of enrollment in order to qualify. Any expenses that are an option and won’t prohibit you from enrolling do not count.
The IRS offers a few options for educational tax credits, but you may only choose one. The other tax credit pertaining to education is the American Opportunity Tax Credit. If you are unsure which credit will give you a lower tax liability, talk with a tax professional. Oftentimes, the AOC provides more savings and as long as you are within your first four years of college, may be eligible.
If you pay for post-secondary education and are beyond your first four years in college, the Lifetime Learning Tax Credit can be a great way to offset your costs. Remember, it is a tax credit, so it’s a dollar-for-dollar credit toward your tax liability. It is not a refundable tax credit, though. This means you may only claim up to the amount that you owe in taxes – you cannot receive any cash in hand.