Maximizing the higher education tax credits

Can I Claim The Lifetime Learning Credit?

The amount you’ll save by claiming the lifetime learning credit depends on how much you actually paid for qualifying expenses, as well as a credit cap. Only single filers with a MAGI of $58,000 or less ($116,000 or less for married filing jointly) can claim the full allowable credit. You can, however, claim a partial credit if you’re single and your income is between $58,000 and $67,000, or if your joint income for married filers is between $116,000 and $134,000. The Lifetime Learning Credit was enacted in the Taxpayer Relief Act of 1997 as one of five new education tax benefits. However, not all students are eligible for the Lifetime Learning tax credit.

  • You have to complete these forms every year to file your tax return ahead of the annual deadline in April.
  • Student loan payments must have been made after March 27, 2020 to be eligible.
  • Upon completion, attach it to your income tax return.
  • There is no tuition fee for the H&R Block Income Tax Course; however, you may be required to purchase course materials.
  • Performance information may have changed since the time of publication.
  • If you start out owing no money on your taxes and apply the full $2,000 credit on top of that, you, unfortunately, will not get a check for the difference.
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We will then generate the correct forms for you in order to claim the education credit or deduction with your return. As a quick refresher, tax credits tend to be more beneficial than deductions because they reduce your tax liability dollar for dollar. Deductions, by contrast, simply reduce the amount of your income that’s subject to taxes.

Tax credits help with higher education

Your tax credit amount isn’t reduced if yourmodified adjusted gross income is below the phase-out limit, but it will be reduced if your income is more. Married filing separately is a tax status for couples who choose to record their incomes, exemptions, and deductions on separate tax returns. Form 8917 is the Internal Revenue Service tax form that a taxpayer must fill out to receive a tax deduction called the tuition and fees deduction. The American Opportunity Credit is worth up to $2,500, and if you have more than one student listed as a dependent, you may claim multiple credits.

The lifetime learning credit isn’t just for undergrads or their parents. The credit applies to undergraduate, graduate and non-degree or vocational students, and there’s no limit on the number of years you can claim it. So it’s ideal for graduate students or anyone taking classes to develop new skills, even if you already claimed the American opportunity tax credit on your taxes in the past. You can’t claim both the American opportunity credit and the lifetime learning credit in the same year.

Graduate Admissions

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At the end of the year, your educational institution should send you a Form 1098-T that reports your eligible costs. To claim the credit, enter those figures on Form 8863. The Lifetime Learning Credit is offered for up to 20% of the first $10,000 of qualified education expenses.

Income criteria for the lifetime learning credit

However, a taxpayer cannot claim both the Hope or American Opportunity Credit and Lifetime Learning Credits for the same student in one year. Thus, the Lifetime Learning Credit may be particularly helpful to graduate students, students who are only taking one course and those who are not pursuing a degree. 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%.

Can I Claim The Lifetime Learning Credit?

However, you can’t necessarily claim the full amount from this tuition statement. You’ll need to subtract any tax-free education assistance you received. This includes tax-free scholarships and fellowships, need-based education grants like Pell Grants, and education assistance provided to veterans or provided by employers. Remember that the American Opportunity Credit is generally the more valuable tax credit, but it is only good for the first four years of higher education and has stricter enrollment requirements. If you qualify for the Lifetime Learning Credit, you can claim it any number of years . When you prepare your return on, we will help you determine which education credit or deduction you qualify for and which one will be the most beneficial to you.

How to claim the credit?

If you spend less than $10,000, your credit isn’t worth as much. While the AOTC has a higher maximum credit than the Lifetime Learning credit, it can only be claimed Can I Claim The Lifetime Learning Credit? for four years of post-secondary education. To find out if you’re eligible for the Lifetime Learning Credit or the AOTC, you can use the IRS’ interactive app.

Can I Claim The Lifetime Learning Credit?

We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. You can’t benefit from multiple education benefits. With the IRS’ no double benefits rule, you can only claim one tax credit for each student in the same tax year. When you file your return, you have to claim either the Lifetime Learning Credit or the AOTC; you can’t claim both.

Courses used to improve job skills are also eligible. There is also a requirement that the student be enrolled “for at least one academic period” within the tax year you claim the LLC in. Other differences include higher income caps for AOTC as well as a higher tax credit–$500 more in tax year 2020. AOTC does have some restrictions that aren’t as generous as LLC–the American Opportunity Tax Credit is limited to four years but you may claim LLC tax benefits for an unlimited number of years.

People of all ages can find themselves pursuing additional education. Maybe you’re a student working toward a graduate degree, or perhaps you’re a professional who’s taking a course to stay on top of changes in your field.