The Lifetime Learning Credit can reduce an eligible taxpayer's federal taxable income by up to $2,000 each year ($4,000 for students attending college in specific Midwestern disaster areas). There is no limit on the number of years the Lifetime Learning Credit may be claimed and no minimum enrollment requirement. For each year the credit is claimed, the taxpayer's family must include a student attending an eligible post-secondary educational institution, must have paid qualified expenses, must meet all eligibility requirements, and must attach a completed Form 8863 to the federal tax return.
To apply for the Lifetime Learning Credit, certain expenses must have been paid for the taxpayer, or a member of the taxpayer's family, who is a student attending an eligible post-secondary educational institution. Eligible expenses are limited to tuition and fees required for enrollment in a degree program or courses to improve job skills.
The Lifetime Learning Credit is calculated per family, based on income and qualified expenses. Total qualified expenses must be reduced by the amount of any tax-free education assistance. Also, the taxpayer must meet income guidelines and have a filing status other than married filing separately.
The Lifetime Learning Credit is 20 percent of up to $10,000 of qualified education expenses (40 percent in specific Midwestern disaster areas) each year. For a dependant student, the credit is usually claimed on the tax return on which an exemption for that student can be claimed. Should the taxpayer choose not to claim an exemption for a dependant student, however, the student may apply for the credit if filing her own tax return. If a grandparent or other person pays qualified education expenses for a student claimed as an exemption, for the purpose of figuring the Lifetime Learning Credit, the taxpayer is considered to have paid the expenses and can include that amount when calculating the credit.
To apply for the Lifetime Learning Credit, complete and attach Form 8863 to your tax return. You will need the name, social security number and amount of qualified expenses for each student, as well as income and filing status information from your tax return.
Please note: Form 8863 is also used to apply for the Hope Credit, which cannot be claimed for the same student in the same year as the Lifetime Learning Credit.