What’s the Lifetime Learning Tax Credit and how does it work?

Several tax credits can help offset the cost of attending college and the various expenses that come with it, and the Lifetime Learning Credit is one of them. For students who file their own tax returns or parents of dependent students, this tax credit can help with education expenses beyond college tuition. Qualified expenses might include a student activity fee or course-related books if the fees or expenses are paid as a condition of enrollment or attendance.

In this article, we’ll cover exactly what the Lifetime Learning Credit is, how to know if you might be eligible for it, and how to claim the tax credit.

The basics of the Lifetime Learning Credit

The Lifetime Learning Credit is a tax credit for eligible students for qualified tuition and related educational expenses. This credit is meant to help students pay for undergraduate, graduate, and professional degrees — including courses to acquire or improve job skills.

The credit is equal to 20 percent of the first $10,000 in qualified education expenses spent. Those claiming the credit are allotted a maximum of $2,000 per tax year. There’s no limit to how many years you claim the credit. It’s important to note that you can only use the Lifetime Learning Credit to help pay the taxes you owe — not for a tax refund.

Who’s eligible to claim the Lifetime Learning Credit?

There are criteria to be eligible to claim this tax credit. All three of the requirements must be met. They are:

• You, your dependent, or another person must pay qualified education expenses for higher education.
  
• The education expenses must be for an eligible student. That student must be enrolled in an eligible educational institution.
• “An eligible student” for the purposes of claiming this credit is defined as you, your spouse, or a dependent you listed on your tax return.

You must meet all qualifying criteria to claim the Lifetime Learning Credit. If you’re confused about whether you meet the requirements, speak with a tax professional.

Lifetime Learning Credit income limits

The income limits for the Lifetime Learning Credit are subject to change each year. Check with IRS to ensure you have the most up-to-date income information.

The current income limits to qualify for this credit per the IRS are:

• For the 2023 tax year (the last tax year the IRS released information on this specifically), the amount of your Lifetime Learning Credit is gradually reduced if your Modified Adjusted Gross Income (MAGI) is between $80,000 and $90,000.
  
• The credit is also gradually reduced for married couples filing a joint return if their MAGI is between $160,000 and $180,000.
• Those with a MAGI of $90,000 or more (or $180,000 or more if married and filing a joint return) are ineligible to claim this credit.

You can estimate your MAGI with the help of online calculators or reach out to a tax professional.

It’s important to remember that there could be changes to these income limits for subsequent tax years. Visit IRS.gov for more information.

How to claim a Lifetime Learning Credit

Fill out the required tax paperwork when you submit your tax return to claim this tax credit if you're eligible. 

A crucial part of being able to do this relates to the Form 1098-T, Tuition Statement, which students receive from their school early in the year. To be eligible for this tax credit, the taxpayer (or a dependent) must have received Form 1098-T, Tuition Statement from an eligible educational institution.

To claim the credit, you must complete the Form 8863. That form must be attached to your complete Form 1040 or 1040-SR when you submit your tax returns.

Final thoughts

Filling out tax forms can be confusing, and you want to make sure everything is correct when you do. If you have any questions about trying to claim the Lifetime Learning Credit, contact a tax professional and ask for help.