When you think of income taxes, the first thing that comes to mind is the credits and the deductions. The Lifetime Learning Credit is a sweet credit because it can apply to just about anyone who take a college course from an accredited institution. What is the Lifetime Learning Credit? The Lifetime Learning Credit is a nonrefundable tax credit with a dollar limit of 20% of the expenses up to a maximum of $10,000. This puts the total credit up to $2,000. Keep in mind that if you have fewer expenses, your credit will be lower. You can claim this credit only once a year, but there is no cap on how many years that you can use it. Now that is a nice tax credit.


The Lifetime Learning Credit is determined by the amount of qualified tuition, related expense for each eligible individual, and your modified adjusted gross income. Qualified tuition is the expenses directly related to tuition or attendance at a post secondary institution of higher learning. Any expense that do not directly impact enrollment in the institution such as living, housing, transportation, insurance, and meals do not apply. An eligible institution includes colleges, universities, technical or vocational schools. They must also be the type of institutions that offer financial aid provided by the Department of Education. An eligible individual is anyone who has taken a one or more courses. These courses do not have to apply towards a degree, and they have no limit such as the first four years of college. So if you are just wanted to improve yourself in some area for work, or just for greater knowledge, then you can still claim this credit.

What if you get a scholarship, but it does not cover all of the expenses of tuition? You have to subtract the scholarship from the total amount of the tuition, but you can calculate your credit based on what is left. You always have to subtract any tax free assistance for tuition that you receive from the total amount that you owe. Scholarships that are reported as loans, personal loans, savings, inheritances, gifts, and personal earnings do not deduct form the qualifying expenses, so don’t include those variables in your calculations. That’s great, right! If you do use a student loan, be sure to claim the Lifetime Learning Credit the year the loan paid your expenses, and not in the year the loan is repaid.

The downside is that you cannot claim both the Lifetime Learning Credit and the American Opportunity Credit. You must chose between one or the other. Furthermore, if you are married, you and your spouse cannot file separately. The more income that you make over $50,000 and married over $100,000 will start phasing out this tax credit. If you are single and make $60,000 or married and make $120,000, this will completely negate the credit. If you make less and meet the following criteria then you can claim it. If you have any questions about these credits you can always refer to the Internal Revenues website for an even more detailed explanation of this and other tax credits.

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