Lifetime Learning Credit

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Lifetime Learning Credit

A direct, dollar-for-dollar reduction of one's tax liability for money spent on higher education. In order to be eligible for the lifetime learning credit, one must have modified adjusted gross income within the limits set by Congress and have a family member enrolled in at least one class at a college, university, technical school, or vocational training. The credit is worth up to $2,000 per year and is non-refundable. Generally speaking, one may not claim a lifetime learning credit if one paid for the class through a 529 plan or if it is deducted as a business expense. Notably, one does not need to pursue a degree in order to be eligible for the credit.

Lifetime learning credit.

You may qualify to claim a lifetime learning tax credit of up to $2,000 each year for qualified higher educational expenses for yourself, your spouse, or a dependent if your family's modified adjusted gross income falls within the annual limits that Congress sets. Those amounts tend to increase slightly each year.

The education must be one or more courses but doesn't have to be part of a degree- or certificate-granting program, though the tax credit can be used for undergraduate, postgraduate, or professional studies.

Even if you are paying for more than one person's education, you can take only one lifetime learning credit per year.

If you claim the credit while you're taking withdrawals from tax-free college savings plans such as a Section 529 plan or an education savings account (ESA), you'll have to plan carefully. Your withdrawals will lose their qualified status and be subject to tax and penalty if you use them to pay for the same expenses for which you claim the tax credit.

You can't take the credit, though, if you claim a tuition and fees deduction in calculating your adjusted gross income or deduct the amount as a business expense.

Lifetime Learning Credit

A nonrefundable credit equal to 20% of the first $10,000 of qualified higher education tuition and fees paid during the year on behalf of the taxpayer, his or her spouse, or his or her dependents. Students attending school in the Gulf Opportunity Zone may qualify for a credit of 40% of their expenses up to $4,000 for 2005 and 2006. See Form 8863.
References in periodicals archive ?
Form 1040/Form 8863, American Opportunity and Lifetime Learning Credits.
Lifetime Learning Credits, as mandated by the Taxpayer
For example, both the Hope and Lifetime Learning Credits are nonrefundable, so the resulting benefits cannot exceed taxes owed.
Both the American Opportunity and Lifetime Learning credits are available through 2012 to offset college costs.
D Plans Educational S: 71,100-86,100 n/a Savings Bonds J: 106,650-136,650 (([section]) 135) A--American Opportunity Credit (AOTC) and Lifetime Learning Credits are not available if Education Expense (([section]) 222) deduction is taken.
The personal credits--which consist of the child and dependent care credit (5ci); the credit for the elderly and the permanently and totally disabled (6ci); the qualified adoption credit; (7ci); the nonrefundable portion of the child tax credit (8ci); the Hope Scholarship and Lifetime Learning credits (9ci) (see Q 7546); the credit for elective deferrals and IRA contributions (the "saver's credit," which became permanent under PPA 2006 (10ci));
28) This exclusion can also be used with either the Hope or lifetime learning credits (see the discussion on p.
The nonrefundable credits are as follows: (1) the personal credits - such as the child and dependent care credit; (8) the credit for the elderly and the permanently and totally disabled (9)--see Q 833), the qualified adoption credit, (10) the Hope Scholarship and Lifetime Learning Credits (11)--see Q 835); the credit for elective deferrals and IRA contributions (the "saver's credit" (12) (which became permanent under PPA 200613); the credit for certain non-business energy property--that is, energy efficient improvements to existing homes (expires December 31, 2007, but is then allowed for property placed in service in 2009) (1); the credit for residential energy efficient property; (2) (2) other non-business credits; and (3) the general business credit.
Back in 1997, the federal Taxpayer Relief Act provided for the Hope Scholarship and Lifetime Learning Credits as a means of opening the doors of college to a new generation, with the largest investment in higher education since the 1956 G.
Planning Point--Taxpayers may not allocate qualified tuition and related expenses to the Hope Scholarship and Lifetime Learning Credits for the same student in the same tax year.
1 HOPE SCHOLARSHIP CREDIT LIFETIME LEARNING CREDIT Limit $2,500 (in 2009 and 2010) $2,000 (in 2009) Covers First two (four in 2009 Unlimited number of years and 2010) years of post- secondary education AGI Phaseout S: $80,000-90,000 (in S: $50,000-60,000 (in Offsets 2009 and 2010) 2009) J: $160,000-180,000 (in J: $100,000-120,000 (in 2009 and 2010) 2009) A--Hope Scholarship and Lifetime Learning Credits are not available if the education expense deduction is taken.
He said new tax credits will be available to more families than the previous Hope and Lifetime Learning credits, which were capped at a family income of $114,000 per year.

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