The lifetime learning credit (LLC) is an assistance scheme established by the government of the United States for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution in the United States. This credit can help pay for undergraduate, graduate and professional degree courses, including courses to acquire or improve job skills.  The lifetime learning credit is worth up to $2,000 per tax return and there is no limit on the number of years you can claim the credit.

Who can claim the lifetime learning credit (LLC)?

To claim the lifetime learning credit, you must meet all three of the following:

• You, your dependent or a third party pay qualified education expenses for higher education.
• You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution.
• The eligible student is yourself, your spouse or a dependent you listed on your tax return.

Read about about the American Opportunity Tax Credit.

Eligibility Requirements

To be eligible for the LLC, the student must:

• Be enrolled or taking courses at an eligible educational institution.
• Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills.
• Be enrolled for at least one academic period beginning in the tax year.

Income Limits for LLC

• For tax year 2023, the amount of your LLC is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
• You can’t claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

How to claim the Lifetime Learning Credit

For you to be eligible to claim the lifetime learning credit (LLC), the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. Generally, students receive a Form 1098-T, Tuition Statement, from their school by January 31. This statement helps you figure your credit. The form will have an amount in box 1 to show the amounts received during the year. But this amount may not be the amount you can claim.

You are required to check the Form 1098-T to make sure it is correct. If it is not correct or you do not receive the form, contact your school. To claim the lifetime learning credit, you must complete the Form 8863. Attach the completed form to your Form 1040 or Form 1040-SR.

What is the Lifetime Learning Credit (LLC) Worth?

The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

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The United States Government introduced the American opportunity tax credit (AOTC) to assist qualified students to settle their education bills. American opportunity tax credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. An eligible student can get a maximum annual credit of $2,500. If the credit brings the amount of tax a student owes to zero, such a student can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to him.

The amount of the credit paid for each eligible student is 100 percent of the first $2,000 of qualified education expenses and 25 percent of the next $2,000 of qualified education expenses paid for that student.

Eligibility Criteria for the American Opportunity Tax Credit (AOTC)

To be eligible for AOTC, the student must:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period* beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

How to Claim the Credit

For a student to be eligible to claim the American opportunity tax credit, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. Generally, students receive a Form 1098-TPDF Tuition Statement, from their school by January 31. This statement helps you figure your credit. The form will have an amount in box 1 to show the amounts received during the year. But this amount may not be the amount you can claim.

You are to check the Form 1098-T to make sure it is correct. If it is not correct or you do not receive the form, contact your school. To claim AOTC, you must complete the Form 8863 and attach the completed form to your tax return.

Take caution while claiming the American Opportunity Tax Credit

You are required to ensure you are qualified before claiming the credit and as well make sure you keep copies of all the documents you used to find out if you qualify and determine the amount of your credit. If the Internal Revenue Service (IRS) audits your return and finds your AOTC claim is incorrect and you do not have the documents to show you are truly qualified, you must pay back the amount of the AOTC you received in error with interest. The Internal Revenue Service (IRS) may also charge you an accuracy or a fraud penalty or you can be banned from claiming the AOTC for two to ten years.

Be informed that if your AOTC claim was disallowed in a previous tax year, you may need to file Form 8862 before claiming the credit in future tax years.

Have a valid TIN before the due date of the return

You may not claim the AOTC unless you, your spouse (if you are filing a joint return) and the qualifying student have a valid Taxpayer Identification Number (TIN) issued or applied for on or before the due date of the return (including extensions). A Taxpayer Identification Number (TIN) is a Social Security number, an Individual Taxpayer Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN).

You may not claim the American opportunity tax credit (AOTC) on a later original return or an amended return if the your Taxpayer Identification Number (TIN) is issued on or applied for after the due date of the return (including extensions).

To ensure you receive the benefit of the American opportunity tax credit (AOTC) if you qualify for it, you should timely obtain the required Taxpayer Identification Number (TIN).

Income Limits for the American Opportunity Tax Credit (AOTC)

• To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
• You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
• You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).

Note that the modified adjusted gross income for most people is the amount of adjusted gross income (AGI), shown on your tax return. If you file Form 1040, you add the following amounts to your adjusted gross income:

• Foreign earned income exclusion,
• Foreign housing exclusion,
• Foreign housing deduction,
• Exclusion of income by bona fide residents of American Samoa, or of Puerto Rico.

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