Lifetime Learning Credit: How Much Is It Worth?

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.

Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.

Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.

Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.

Updated: Dec 22, 2020, 11:05pm

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Over the past decade, the cost of college has increased by over 25%. With rising tuition and fees, you may be looking for ways to lower your education costs.

Education tax credits are one way to offset your school expenses. The Lifetime Learning Credit is a tax credit designed for students enrolled at eligible educational institutions and can reduce your tax bill by up to $2,000 per tax return, making school more affordable. Research has found that education tax credits like the Lifetime Learning Credit increased college attendance by 7%.

However, not all students are eligible for the Lifetime Learning tax credit. Here’s what you need to know about this valuable tax credit and its eligibility criteria.

What Is the Lifetime Learning Credit?

The Lifetime Learning Credit was enacted in the Taxpayer Relief Act of 1997 as one of five new education tax benefits.

The Lifetime Learning Credit is a tax credit. Tax credits reduce the amount of taxes you owe on a dollar-for-dollar basis when you file your federal tax return. They differ from tax deductions, which reduce your taxable income. Tax credits are available to all taxpayers, even if you don’t itemize your deductions.

Under the Lifetime Learning Credit, you can claim 20% of up to $10,000 in qualifying costs, with a maximum of $2,000 per return. The Lifetime Learning Credit is a nonrefundable credit, so you can use the credit to pay your tax bill, but you won’t receive money back as a refund if your tax bill is $0.

Unlike other education tax credits, there is no limit on the number of years you can claim the Lifetime Learning Credit. You can continue to claim the credit if you decide to take additional courses as long as you meet the other eligibility criteria.

Who Qualifies for the Lifetime Learning Credit?

Eligible students at educational institutions can claim the Lifetime Learning Credit on their tax returns. To qualify for the credit, taxpayers must:

• Be enrolled or take courses at least part-time at an eligible educational institution
• Take classes to get a degree, professional credential or to improve your job skills
• Be enrolled for at least one academic period beginning in the tax year for which you are claiming the credit

For the purposes of the Lifetime Learning Credit, eligible educational institutions are schools offering higher education for high school graduates. Eligible institutions include colleges, universities and trade schools that participate in a student aid program run by the U.S. Department of Education. To find out if your school qualifies, check to see if your school is on the Database of Accredited Post Secondary Institutions and Programs or the Federal Student Loan Program list, which shows eligible international schools.

Only certain education expenses, such as tuition and required fees for enrollment, qualify for the Lifetime Learning Credit. Other college costs, such as room and board, transportation and medical expenses, aren’t eligible.

What Is the Lifetime Learning Credit Income Limit?

There are income restrictions to the Lifetime Learning Credit. You can receive the full credit if your modified adjusted gross income (MAGI) is less than $68,000 ($136,000 if married filing jointly). The credit is gradually phased out if your income is between $58,000 and $68,000 ($116,000 and $136,000 if you file a joint tax return), so you may not qualify for the full credit. If your income is over $68,000 (or $136,000 with a joint tax return), you’re not eligible for the Lifetime Learning Credit.

How to Claim the Lifetime Learning Credit

To claim the Lifetime Learning Credit, follow these steps:

• Collect your Form 1098-T. If you paid tuition and fees to your school, the law requires the institution to send you Form 1098-T, Tuition Statement. You’ll typically receive it by Jan. 31 of the year following the tax year in question, and the form will list how much you paid in tuition and fees.
• Complete your Form 1040 or 1040-SR. Next, fill out your Form 1040-Individual Income Tax Return or the 1040-SR-Tax Return for Seniors. You have to complete these forms every year to file your tax return ahead of the annual deadline in April.
• Fill out Form 8863. Finally, complete Form 8863-Education Credits, and attach it to your tax return. If you’re using a tax preparation program like TurboTax or TaxSlayer, the program will walk you through the steps to claim the credit and will attach it for you.