Every course taken beyond high school has costs. Lifetime Learning Credit is a designed claim for costs associated with education. It is important for taxpayers to claim any expenses billed for such credits. Some tax liabilities can even span for a lifetime.
A tax credit up to $2,000 can be claimed for education expenses by tax filers, with $10,000 designated in tax complete education costs.
Unlike any other credit, LLC is available for claim for an unlimited number of years. This is beneficial to those engaged in lifelong learning. Any student enrolled in a school, even for a single course, has the right to apply for the LLC.
Who Can Be Benefited From the LLC?
The LLC encompasses a multitude of different taxpayers, such as:
- Graduate and professional students
- Parents who are responsible for a supporting a child and therefore can claim they, or other taxpayers, dependents
- Certification or part-time working students
- All individuals who qualify for continuing education acceptance at a recognized, eligible institution of learning
Eligibility Requirements
To claim the LLC, you must meet IRS requirements:
- The student must be you, your spouse, or a dependent listed on your tax return.
- The student must be enrolled in at least one course at an eligible institution.
- Taxpayers, who are, and claim as married filing jointly, are eligible.
- Course enrollment that you register for takes must not be less than one at a recognized eligible institution.
How Much Is the Credit Worth?
The LLC’s benefits include:
- Filing taxes and claiming as head of household.
- Claiming taxes as single is also eligible.
- Maximum is $2000, not per student, per tax return.
- Pays 20% from the first $10,000 of qualified expenses.
Example:
- $3,000 in tuition results in a $600 credit.
- $8,000 in tuition results in a $1,600 credit.
- $12,000 in tuition results in the maximum $2,000 credit.
The non-refundable credit will be able to bring your tax bill down to zero, however, it will not issue a refund if it exceeds your tax liability.
Income Limits
How much a person can earn and still be eligible for the credit depends on your Modified Adjusted Gross Income (MAGI):
- The range for single taxpayers starts at $80,000 and ends at $90,000.
- If you are married and filing jointly the range jumps from $160,000 to $180,000.
- If you are married and filing separately you are not eligible.
How to Claim the Lifetime Learning Credit
The requirements to claim the lifetime learning credit are:
- Gather Documentation
- Request a Form 1098-T from the college or university.
- Keep receipts for tuition and other necessary materials.
- Complete IRS Form 8863: In this case, to calculate and claim the credit.
- Attach Your Tax Return
- Attach Form 8863 to your Form 1040 or 1040-SR.
- Do it electronically to save time.
Lifetime Learning Credit vs. American Opportunity Credit
| Feature | Lifetime Learning Credit (LLC) | American Opportunity Credit (AOC) |
| Maximum Credit | $2,000 per return | $2,500 per student |
| Years You Can Claim | Unlimited | First 4 years of undergraduate study |
| Eligible Students | Any student | Undergraduate students only |
| Enrollment Requirement | One course minimum | At least half-time |
| Refundable? | No | Partially (up to $1,000) |
Between the two: Parents with undergraduates tend to rely more on the AOC, while graduate students, part-time students, and professionals tend to the LLC.
Common Mistakes to Avoid
- Claiming the same expenses for more than one credit or deduction
- Including ineligible expenses such as room, board, or transportation
- Filing under an ineligible status, such as married filing separately
Conclusion
The Lifetime Learning Credit is one of the more flexible education tax benefits. Whether you are working towards a degree, advancing your career, or taking a course just for the sake of taking one, the LLC will reduce your tax liability year after year.
If you are unsure of your eligibility, or want assistance completing Form 8863, you may benefit from consulting Dimov NYC CPA in the hope of maximizing your education-related tax liability.
FAQs
Who is eligible for the Lifetime Learning Credit?
You, your spouse, or a dependent must be enrolled in at least one course at an eligible institution. Your MAGI must be under $90,000 (single) or $180,000 (married filing jointly).
How many times can you claim the Lifetime Learning Credit?
Unlimited. You can claim it every year you qualify — there is no limit on the number of years.
Can parents claim the LLC for their children?
Yes. Parents can claim the credit if they claim the child as a dependent and pay eligible education expenses.
Can I claim both the LLC and the AOC?
No. You cannot claim both credits for the same student in the same year.
What expenses qualify for the LLC?
Tuition, required fees, and course materials needed for enrollment. Room, board, and transportation are not eligible.