The Basics of the Lifetime Learning Credit

In 1997, the Taxpayer Relief Act was passed the lifetime Learning credit. The Lifetime Learning education credit has helped to open doors to higher education for many taxpayers by providing them with a tax credit to help offset the cost of their education. The Lifetime Learning Credit allows you to credit up to $2,000 from qualifying expenses on the first $10,000 spent towards tuition and fees. The greatest benefits of the Lifetime Learning credit is that there is no time limit on claiming it and you only need to have taken one college course to tax the credit.

Qualifying

In order to qualify for the Lifetime Learning Credit on your taxes, you, your spouse, or qualifying dependent must be taking a college course at an eligible post-secondary institution. The course must be taken for credit. If the course is for no credit, you are not eligible. jAlso, the school must participate in the federal financial aid program and be accredited.

The qualifying expenses include tuition and eligible registration fees. Non-qualifying expenses are books, equipment, room and board, supplies, student health insurance and living expenses. The student must be a resident or alien of the U.S. In addition, your household modified adjusted income must be less than $48,000 per year if you are single, or $96,000 if you are filing jointly.

Difference from Other Education Credits

In addition to the Lifetime Learning credit, there are two other education credits available for taxpayers to claim: the Hope credit and the American Opportunity credit. The Lifetime Learning credit unique because it is does not have time limits when it can be claimed and the tax credit is $2,000.

The Hope Credit is only available to students during their first two years of college. It provides a $1,800 tax credit. The American Opportunity Tax credit expands upon the existing Hope Credit for the tax years 2009 and 2010. This expansion provides a tax credit increase of $2,500. For those impacted by the Floods of 2008, the tax credit is $3,600, for tax years 2009 and 2010.

Claiming

While the Lifetime Learning does not have time limits, you want to be sure to take advantage of the education credit that is most applicable to your situation. If you, your spouse, or dependent have completed their first two years of college, it would be best to claim either the Lifetime Learning credit or the American Opportunity Tax credit.

If you, your spouse, or dependent are within the first two years of higher education, it would be best to claim the Hope credit. If you are unsure as to when to claim the Lifetime Learning credit, consult a tax advisor. You can only claim one type of credit for each eligible person in the household. Be careful about your selection because choosing the wrong credit can be costly in an audit.

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