The second part of our back-to-school savings series examines another tax-saving credit for college students – the Lifetime Learning Credit.
What is the Lifetime Learning Credit?
The Lifetime Learning Credit is an IRS tax credit designed to reduce a tax bill from Uncle Sam on a dollar-for-dollar basis for a percentage of tuition, fees, and other education-related expenses for a student to attend an institution of higher education. This could be for yourself, your spouse, or a dependent, such as a child or grandchild.
In IRS lingo, the credit covers “qualified tuition and related expenses.” This typically encompasses most tuition and fees paid to a post-secondary school, with the exception of student activity and athletic fees, insurance a student may pay for, and room and board costs such as living in a dormitory and having a meal plan.
How Much is the Lifetime Learning Credit Worth?
The Lifetime Learning Credit has a value of a 20% credit on the first $10,000 spent on post-secondary education, such as attending a college or university. As such, the maximum value of this credit is $2,000 per household. The credit is only available on a per-taxpayer basis.
Who Can Claim the Lifetime Learning Credit?
Like other IRS tax credits, there are a few limitations on who is eligible to claim the Lifetime Learning Credit on education expenses. First off, a student must be enrolled in post-secondary school on at least a part-time basis in terms of credit hours. Secondly, there are some income limitations on the credit intended to make it more readily available to low and moderate income earners. The credit is gradually phased out after a taxpayers modified adjusted gross income (MAGI) exceeds $54,000 and is entirely phased out when this amount exceeds $64,000. For joint filers, these limits are doubled to $108,000 and $128,000, respectively. Finally, the Lifetime Learning Credit and the Hope Credit cannot be claimed for one student in the same year.
Learn about more tax credits for education savings by teaming up with 1-800Accountant today. Call 1-800-222-6868 or visit the “Services” page on www.1-800Accountant.
Photo credit: 123RF Stock Photo