Lifetime Learning Tax Credit
What is the Lifetime Learning Tax Credit?
The Lifetime Learning tax credit is a tax credit available to individuals
who file a tax return and owe taxes. This means the amount of the
credit is subtracted directly from a family's actual tax liability,
rather than reducing taxable income like a tax deduction does. The
Lifetime Learning credit is not refundable. A family may claim a tax
credit of up to $1,000 per tax year (until January 1, 2003) and $2,000
per tax year (after that date) for the taxpayer, taxpayer’s spouse,
or any eligible dependents for an unlimited number of tax years. A
family may claim up to 20% of $5,000 of eligible expenses for expenses
paid after June 30, 1998 and prior to January 1, 2003, and up to 20%
of $10,000 of eligible expenses (for expenses paid after January 1,
2003 and after).
Who Qualifies?
THE TAXPAYER: An eligible taxpayer must file a tax return and owe taxes to claim
the credit. The taxpayer must also claim the eligible student as a dependent,
unless the credit is for the taxpayer or the taxpayer’s spouse. The taxpayer
is eligible for the maximum benefit with an Adjusted Gross Income (AGI) of up
to $40,000 for a single taxpayer (or $80,000 for married taxpayers). The credit
amount is phased- out between $40,000 and $50,000 for single taxpayers (or $80,000
and $100,000 for married taxpayers).
THE STUDENT: An eligible student must be enrolled at least half-time in an
eligible program leading to a degree or certificate at an undergraduate or graduate
degree at an eligible school during the calendar year or may be enrolled at
any enrollment level in any course of instruction at an eligible school to acquire/improve
the student’s job skills during the calendar year. The student may claim the
credit if the student is not claimed as a dependent by another taxpayer.
How Do You Get the Credit?
To qualify for the credit, the taxpayer must report the amount of tuition and
fees paid as well as the amount of certain scholarships, grants, and untaxed
income used to pay the tuition and fees. Current law specifies that schools
will supply this information in the form of a ‘return’ to individual taxpayers
and to the IRS. More information about the return will be available after the
Treasury Department issues regulations to implement this law.
When is the Credit Available?
The taxpayer may claim the Lifetime Learning credit for qualified expenses paid
July 1, 1998 and after.
Can a Family Claim Multiple Benefits?
A family may claim a Lifetime Learning credit, a Hope credit and an exclusion
from gross income for certain distributions from qualified State tuition programs
or education IRAs as long as the same student is not used as the basis for each
credit or exclusion and the family does not exceed the Lifetime Learning maximum
per family.
Hope Scholarships
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