What Is the Lifetime Learning Credit (LLC)?

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What Is the Lifetime Learning Credit (LLC)?

I'm here to explain the Lifetime Learning Credit, or LLC, which is part of the U.S. federal income tax code. It allows you, whether you're a parent or a student, to reduce your tax bill by up to $2,000 to cover higher education costs. Keep in mind, this credit isn't refundable, so you can only use it to pay off taxes you owe, and you won't get any extra back as a refund, as per the IRS.

You can claim this credit every year without any cap on the number of times. However, you can't pair it with the American Opportunity Tax Credit in the same tax year.

Key Takeaways

The Lifetime Learning Credit covers qualified tuition and related expenses for eligible students at approved educational institutions.
It helps with costs for undergraduate, graduate, and professional degree courses, plus those that build or enhance job skills.
There's no restriction on how many years you can claim it, and it's valued at up to $2,000 per tax return.
Unlike the American Opportunity Credit, which is limited to undergraduate studies, the LLC has broader applications.
If your modified adjusted gross income exceeds $90,000 as an individual or $180,000 for joint filers, you can't claim it.

How the Lifetime Learning Credit (LLC) Works

You can claim the LLC if you're enrolled in undergraduate, graduate, or professional degree programs. It also applies to courses focused on specific career skills.

To qualify, you need to be at an IRS-eligible educational institution, pursuing higher education toward a degree or a credential that aids in job skills development or improvement.

Additionally, you must be enrolled for at least one academic period starting in the tax year you're claiming for. The IRS considers an academic period as a semester, trimester, quarter, summer session, or whatever the school defines.

Important Note on Eligible Institutions

As the IRS states, an eligible educational institution is any school providing higher education past high school level. This includes colleges, universities, vocational schools, or other post-secondary places that can participate in federal student aid programs from the U.S. Department of Education.

Income Limitations for the LLC

For the full credit in tax year 2022, your modified adjusted gross income, or MAGI, needs to be $80,000 or less if filing individually. For joint filers, it's $160,000 or less. If you're an individual with MAGI of $90,000 or more, or a joint filer at $180,000 or more, you don't qualify at all.

The credit phases out if your MAGI goes over these thresholds, meaning you can't claim the full $2,000. Note that for joint filers, the MAGI reduction amounts haven't been adjusted for inflation since after December 31, 2020, according to the IRS.

How to Claim the LLC

To claim the LLC or the similar AOTC, you or your dependent must receive Form 1098-T, the Tuition Statement, from your eligible school. This form helps calculate your credit, showing amounts received in Box 1, but remember, the claimable amount might include other qualified expenses beyond just tuition.

Verify that your Form 1098-T is accurate. If it's wrong or you don't get it, reach out to your school. Then, fill out Form 8863 and attach it to your Form 1040 or 1040-SR to claim the LLC.

Warning

You can't claim both the American Opportunity Credit and the Lifetime Learning Credit simultaneously. Assess your eligibility and choose the one that fits your situation best.

The U.S. government offers several ways to subsidize higher education through tax credits, deductions, and savings plans, all aimed at reducing your income tax burden if you're a student or parent.

These include the LLC, the American Opportunity Tax Credit (AOTC), the tuition and fees deduction, and 529 savings plans. The AOTC targets the first four years of higher education, providing up to $2,500 per eligible student annually, and it's partially refundable—up to 40% of the remainder (max $1,000) if it zeros out your tax owed.

The tuition and fees deduction lets you subtract up to $4,000 of eligible expenses from your taxable income. A 529 plan is a tax-advantaged way to save for future education costs, often for children or grandchildren.

Tip

The IRS has an interactive app called 'Am I Eligible to Claim an Education Credit?' that you can use on your mobile device to check your eligibility for these credits.

How Much Is the Lifetime Learning Credit?

The LLC amounts to up to $2,000, calculated as 20% of the first $10,000 in qualified education expenses per tax year, adjusted based on your MAGI.

How Many Times Can You Claim the Lifetime Learning Credit?

There's no lifetime limit; if you qualify, you can claim it every single tax year.

Can Parents Claim the Lifetime Learning Credit?

Yes, parents can claim it for a dependent child. But it's limited to $2,000 per tax return, not per child—so even with multiple dependents, you get the max once.

What’s the Difference Between the American Opportunity Credit and the Lifetime Learning Credit?

The American Opportunity Credit is for the first four years of undergraduate studies only, formerly known as the Hope credit. In contrast, the LLC covers undergraduate, graduate, professional programs, and some trade schools.

The AOTC offers up to $2,500 and allows multiple claims if you have several dependent students. The LLC is capped at $2,000 once per return.

When Does the Lifetime Learning Credit Expire?

It doesn't expire; you can use it year after year as long as you meet the qualifications.

The Bottom Line

These government tax tools—credits, deductions, and savings plans—are practical for managing the increasing costs of higher education. If you qualify for the Lifetime Learning Credit, take the time to file the paperwork; it's effective for undergraduate, graduate, professional courses, and job skill programs.

What Is the Lifetime Learning Credit (LLC)?

Highlights