Do you have children who have been in college for more than two years? More than five years? Would you like to return to school yourself?
You could be eligible for a Lifetime Learning Credit on your federal tax return to help ease the cost of tuition.
What is the Lifetime Learning Credit?
The Lifetime Learning Credit allows taxpayers to claim a credit on their tax return for the qualified tuition paid for themselves, their spouse or one of their dependents to attend a postsecondary school. The student must be pursuing a college degree, graduate degree or vocational training.
The Lifetime Learning Credit is family based rather than based on the number of students in a family, e.g., the Hope Scholarship Tax Credit. The Lifetime Learning Credit offers an allowable credit of up to $2,000 per tax return per year for an unlimited number of years.
Specifically, this credit allows for a 20% credit of the first $10,000 of qualified educational expenses paid for all eligible students per year.
The credit is available for tuition and required fees, less any grants or scholarships. Qualified tuition does not include costs such as room and board, books, student health fees and tuition for non-credit classes.
The Lifetime Learning Credit can be claimed by the student if they are not claimed as a dependent on anyone else's tax return. If they are a dependent, the individual(s) who is claiming them as a dependent can take the credit if available.
What is a credit?
Tax credits are "gold" when it comes to saving money on your tax return. Unlike a deduction, a tax credit is subtracted from the tax liability of the individual(s) filing the tax return. For example, if your tax liability for 2010 is $5,000 and you have a $1,000 Lifetime Learning Credit, you will only pay $4,000 in taxes.
Who Qualifies?
To be eligible for The Lifetime Learning Credit, you must be an individual who:
- Is not claiming the Hope Scholarship Credit. If you have more than one student in a family, one student may qualify for the Lifetime Learning Credit, while the other may qualify for the Hope Credit. No student can qualify for both credits at the same time.
- Unlike the Hope Credit, the student does not have to be pursuing a degree or certificate or be registered at least half-time. This credit is less restrictive.
When can I claim the Lifetime Learning Credit?
The Lifetime Learning Credit includes all qualified educational expenses paid during the current year. For example, if you pay for tuition in December 2010, but the semester does not begin until January 2011, you will be allowed to include this amount on your 2010 tax return.
To help you keep track of what you have paid during the year, schools must send a Form 1098-T to each taxpayer and to the IRS by January 31st. The amount of tuition and fees you paid to their institution during the previous year is listed on form 1098-T.
Phase Out
Like many other tax credits and deductions, the Lifetime Learning Credit also has some restrictions based on your income. For 2010, the Lifetime Learning Credit is phased out when a single taxpayer's Adjusted Gross Income reaches $60,000 in 2010.
For taxpayers who file a Married Filing Joint return, the credit is phased out when your AGI reaches $120,000 in 2010.
If you would like additional information regarding this issue or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.
