taxmap/pubs/p970-011.htm#en_us_publink1000178139For 2010, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American opportunity credit and the lifetime learning credit. This chapter discusses the lifetime learning credit. The American opportunity credit is discussed in
chapter 2.
This chapter explains:
- Who can claim the lifetime learning credit,
- What expenses qualify for the credit,
- Who is an eligible student,
- Who can claim a dependent's expenses,
- How to figure the credit,
- How to claim the credit, and
- When the credit must be repaid.
For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. There is no limit on the number of years the lifetime learning credit can be claimed for each student.
A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. The lifetime learning credit is a nonrefundable credit. This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you.
Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax.
 | You can choose the education benefit that will give you the lowest tax. You may want to compare the tuition and fees deduction ( chapter 6) to either of the education credits. |
taxmap/pubs/p970-011.htm#en_us_publink1000178149For each student, you can elect for any year only one of the credits. For example, if you elect to take the lifetime learning credit for a child on your 2010 tax return, you cannot, for that same child, also claim the American opportunity credit for 2010.
If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both.
If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year.
taxmap/pubs/p970-011.htm#en_us_publink1000178150There are several differences between these two credits. For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope credit was claimed counts toward the 4 years. However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. The differences between these credits are shown in
Appendix B near the end of this publication.
See Table 3-1 for the basics of the lifetime learning credit. The details are discussed in this chapter.
taxmap/pubs/p970-011.htm#en_us_publink1000178153 The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return.
taxmap/pubs/p970-011.htm#en_us_publink1000178154Generally, you can claim the lifetime learning credit if all three of the following requirements are met.
- You pay qualified education expenses of higher education.
- You pay the education expenses for an eligible student.
- The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
taxmap/pubs/p970-011.htm#en_us_publink1000255428
Table 3-1. Overview of the Lifetime Learning Credit
| Maximum credit | Up to $2,000 credit per return |
| Limit on modified adjusted gross income (MAGI) | $120,000 if married filling jointly;
$60,000 if single, head of household, or qualifying widow(er) |
| Refundable or nonrefundable | Nonrefundable—credit limited to the amount of tax you must pay on your taxable income |
| Number of years of postsecondary education | Available for all years of postsecondary education and for courses to acquire or improve job skills |
| Number of tax years credit available | Available for an unlimited number of years |
| Type of degree required | Student does not need to be pursuing a degree or other recognized education credential |
| Number of courses | Available for one or more courses |
| Felony drug conviction | Felony drug convictions are permitted |
| Qualified expenses | Tuition and fees required for enrollment (including amounts required to be paid to the institution for course-related books, supplies, and equipment) |
| Payments for academic periods | Payments made in 2010 for academic periods beginning in 2010 and in the first 3 months of 2011 |
Note.Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you.
You may find
Figure 3-1, on the next page, helpful in determining if you can claim a lifetime learning credit on your tax return.
You cannot claim the lifetime learning credit for 2010 if any of the following apply.
- Your filing status is married filing separately.
- You are listed as a dependent in the Exemptions section on another person's tax return (such as your parents'). See Who Can Claim a Dependent's Expenses, later.
- Your modified adjusted gross income (MAGI) is $60,000 or more ($120,000 or more in the case of a joint return). MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit.
- You (or your spouse) were a nonresident alien for any part of 2010 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
- You claim the American opportunity credit or a tuition and fees deduction for the same student in 2010.
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