The Lifetime Learning Credit

The Lifetime Learning Credit is offered to encourage people to improve or acquire new job skills. This credit applies to tuition and fees for undergraduate, graduate, and continuing-education courses. Qualified tuition and related expenses are tuition and fees a student must pay to be enrolled at or attend an eligible educational institution. The following are not qualified tuition and related expenses: (1) amounts paid for any course or other education involving sports, games or hobbies (unless the course or other education is part of the student's degree program); (2) charges and fees for room, board, student activities, athletics, insurance, books, equipment, transportation (and similar personal, living or family expenses). If you or the student claim a deduction for higher education expenses, such as on Schedule A or Schedule C (Form 1040), you cannot use those expenses when figuring your education credits. Also, higher education expenses paid with a tax-free scholarship, Pell Grant or employer-provided educational assistance cannot be used when figuring your education credits. Part-time and full-time students are eligible for the Lifetime Learning Credit. Unlike the American Opportunity Tax Credit, you are not required to be enrolled at least half-time in one of the first two years of post-secondary education. You may be eligible to receive a partial credit, even if you are taking only a single course at a community college.

You are eligible for the Lifetime Learning Credit if you have qualified expenses paid in 2011 as a student enrolled at or attending an eligible educational institution. The full amount of the Lifetime Learning Credit is available to married taxpayers filing jointly with an adjusted gross income (AGI) of $122,000 or less and to single taxpayers with an AGI of $61,000 or less. Married taxpayers with a combined AGI of $122,000 or greater and single taxpayers with an AGI of $61,000 or greater are ineligible for these credits. You cannot claim credits if your filing status is married and filing separately or you are claimed as a dependent on another person's tax return (such as your parents’ return). Taxpayers cannot use both the American Opportunity Tax Credit and Lifetime Learning Credits for the same student in a single year.

The amount that may be claimed as a credit is equal to 20 percent of the taxpayer’s first $10,000 of out-of-pocket qualified tuition and related expenses for all the students in the family. The maximum credit a taxpayer may claim for a taxable year is $2,000. These amounts are not indexed for inflation. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits. This credit may be claimed for an unlimited number of years.

The Lifetime Learning Credit is nonrefundable. If the taxpayer is claiming the American Opportunity Tax Credit for a particular student, none of that student’s expenses for that year may be applied toward the Lifetime Learning Credit.

For more information about the Lifetime Learning Credit, call the IRS at 1-800-TAX-1040 or visit their web site at www.irs.gov.