Maximizing Education Costs with the Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is a great way to lower your tax bill if you’re covering education expenses for yourself, a spouse, or a dependent. Unlike some other education credits, the LLC applies to a wide range of courses, not just degree programs, and it can be claimed for as many years as you’re eligible. This flexibility makes it a helpful option for anyone looking to learn new skills or further their education — whether that means getting a certification, brushing up on a skill, or even advancing in a degree program.

If you’re looking to save on education-related costs, the LLC can reduce your taxes by up to $2,000 a year. To make the most of it, it’s essential to know what counts as eligible expenses, who qualifies, and how it compares to other education credits like the American Opportunity Tax Credit (AOTC). Here’s a guide to understanding how the LLC works and tips for using it effectively.

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What is the Lifetime Learning Credit?

The LLC is a tax credit designed to help students, professionals, and lifelong learners reduce the cost of education. It’s available to those enrolled in eligible educational programs or courses aimed at improving job skills. The LLC covers a broad range of courses, from part-time classes to certificate programs and even graduate-level courses.

Who qualifies for the Lifetime Learning Credit?

You may qualify if you, your spouse, or a dependent are enrolled in a course at an eligible educational institution, which includes most universities, colleges, and trade schools. Unlike the AOTC, the LLC doesn’t require you to be pursuing a degree; the credit is available to anyone improving their job skills. However, there are income limits — your modified adjusted gross income (MAGI) must be below $69,000 (or $138,000 for married couples filing jointly) to claim the full credit.

How much is the credit worth?

The LLC is worth 20% of the first $10,000 of eligible education expenses, meaning you could receive up to a $2,000 tax credit per return each year. However, the credit is non-refundable, so while it can lower your tax bill to zero, it won’t result in a refund if you don’t owe any taxes.

What expenses qualify for the LLC?

Qualified expenses for the LLC include tuition and required fees, though they don’t cover room, board, or transportation. Books, supplies, and equipment only qualify if they’re required to enroll in or attend the course. Make sure to save receipts and enrollment documentation as proof when filing.

Can you claim the Lifetime Learning Credit and the AOTC?

No, you can’t claim the LLC and the AOTC for the same student in the same tax year. However, you can use one credit for one student and the other for a different student if you have multiple people in school. Generally, the AOTC is better if you’re an undergraduate because it offers a higher refundable amount. For non-degree or graduate courses, the LLC is typically the best option.

Does the Lifetime Learning Credit affect other benefits?

Claiming the LLC doesn’t usually impact other federal benefits like SNAP, Medicaid, or SSI, as the credit isn’t considered income. It also won’t interfere with federal student aid. However, since the LLC reduces your tax bill, it may affect your eligibility for certain state-based tax credits or educational assistance programs, so check with a tax advisor if you’re unsure.

How do you claim the Lifetime Learning Credit?

To claim the LLC, you’ll need Form 8863, "Education Credits," and you must have a Form 1098-T from the school where you or the student is enrolled. You’ll list eligible expenses and calculate the credit, then apply it on your tax return. A tax professional or advisor can help ensure you’re maximizing your LLC benefits while following IRS guidelines.