WHAT IS 'Lifetime Learning Credit'

The lifetime learning credit (LLC) is a provision of the U.S. federal income tax code that lets parents and students lower their tax liability by up to $2,000 to help offset higher education expenses. The credit matches the money spent by parents or students on tuition dollar for dollar, up to the $2,000 limit.

This credit may be claimed year after year, without a limit. However, it cannot be combined with the Hope Credit or American Opportunity Credit in the same tax year.

BREAKING DOWN 'Lifetime Learning Credit'

The Lifetime Learning Credit may be claimed when a student is enrolled in undergraduate, graduate or professional degree courses. The credit may also be used for courses in specific career-related skills.

In order to be eligible for the LLC, a student must be enrolled at an institution that is considered eligible by the IRS. They must be taking higher education courses towards a degree or a recognized educational credential that provides or improves job skills. Finally, they must be enrolled at a qualifying institution for at least one academic period that began within the tax year for which they’re claiming the credit. The IRS defines “academic period” as a semester, trimester, quarter, summer session, or other period determined by the school.

Income Limitations for the LLC

In order to claim the full credit, a taxpayer’s modified adjusted gross income (MAGI) cannot be over $66,000 if they file as an individual. For taxpayers filing jointly, income must be less than $132,000. Taxpayers filing individually whose MAGI is below $66,000 but above $56,000 receive a reduced amount of the credit. If filing jointly, taxpayers with MAGI of between $112,000 and $132,000 receive the reduced credit. Taxpayers with MAGI of over $66,000, or $132,000 for joint filers, cannot claim the credit at all.

Other Tax Credits Related to Education

The U.S. government subsidizes individuals' higher education expenses through a number of tax credits, tax deductions and tax-advantaged savings plans. Each of these programs lowers income tax liability for students or their parents. The subsidies include the Lifetime Learning Credit, the American Opportunity Tax Credit, the tuition and fees deduction and 529 savings plans.

The American Opportunity Tax Credit (AOTC) is a credit that is specifically for education expenses during the first four years of a student’s higher education. The maximum credit allowed each year is $2,500.

The tuition and fees deduction simply allows taxpayers to deduct up to $4,000 from their taxable income in eligible expenses when filing their taxes. 529 savings plans help people to save money for future tuition through a tax-advantaged savings plan.

To help taxpayers understand which credits they qualify for, the IRS provides an interactive app through its website.

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