Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Lifetime Learning credit for qualified tuition and related higher education expenses (MS Word)
Lifetime Learning credit for qualified tuition and related higher education expenses (.pdf)
Lifetime Learning credit for qualified tuition and related higher
education expenses
Dear Reader:
The Lifetime Learning credit for tuition and related expenses may
allow you to save on your taxes for higher education expenses you
incur for yourself, your spouse, or your dependents.
The maximum Lifetime Learning credit you can claim is $2,000 per
year (20% of up to $10,000 of expenses). The $2,000 maximum isn't
adjusted annually for inflation.
The credit is available for any post-high school education
(including graduate-level courses and courses to acquire or improve
job skills) at an eligible school. In general, eligible schools
include: (1) accredited schools offering credit towards a bachelor's
or associate's degree or other recognized post-high school
credential and (2) certain vocational schools.
The student need not be enrolled in a degree or certificate program.
There's no course minimum. The credit may be available even if only
one course is taken.
The Lifetime Learning credit isn't allowed for an education expense
that is deductible (for example, as a business expense). Taxpayers
can elect to claim an above-the-line deduction for qualified tuition
and related expenses instead of the Lifetime Learning credit that's
available through 2009.
If a tax-exempt distribution from a Coverdell education savings
account (formerly known as an education individual retirement
account, or education IRA), or qualified tuition program (also known
as a 529 plan) is received for the student in the same year, the
Lifetime Learning credit may only be claimed for expenses not
covered by the distribution.
To be eligible for the credit for a year, the qualified expenses
must be paid during the year for education furnished during an
academic period (e.g., semester) starting within the year or within
the first three months of the following year. Accordingly, for some
expenses you'll have a choice: For a semester beginning in January
of Year 2, you can pay the expenses either in Year 1 or 2 and claim
the credit for the year of payment.
The credit is nonrefundable, i.e., it can reduce your regular tax
bill and, through 2009, your alternative minimum tax (AMT) bill, to
zero but cannot result in a refund. Also, if the expenses on which
the credit is based are later refunded, you may have to recapture
the credit you claimed, i.e., your tax in the year of the refund may
be increased due to a recomputation of the credit claimed in the
earlier year.
Expenses that qualify for the credit include tuition and academic
fees required for enrollment or attendance at an eligible
educational institution. They don't include student activity fees,
athletic fees, insurance, books, room and board, transportation
costs, or other personal living expenses. The cost of a course or
education involving sports, games, or hobbies doesn't qualify unless
it's part of the student's degree program. Qualified expenses for
purposes of the credit are reduced by tax-exempt scholarships and
fellowships, certain military benefits, and any other tax-exempt
payments of those expenses (other than gifts or bequests).
For 2008, the credit is “phased out” ratably for married taxpayers
filing jointly with adjusted gross income (AGI), with certain
modifications, between $96,000 and $116,000 (between $100,000 and
$120,000 for 2009). That is, for joint filers, the credit is reduced
if modified AGI for 2008 is between $96,000 and $116,000 (between
$100,000 and $120,000 for 2009), and it is unavailable if AGI is
$116,000 or more for 2008 ($120,000 or more for 2009). For taxpayers
filing as single or head of household, the phase-out range for 2008
is $48,000 to $58,000 ($50,000 to $60,000 for 2009). Married
taxpayers who file separate returns can't claim the credit.
The Lifetime Learning credit isn't allowed to an individual who is
claimed as a dependent on another's tax return. Instead, the credit
for that individual is claimed on the return claiming him or her as
a dependent. In such a case, the credit is based on the qualified
expenses paid by both the student and the person who claims the
student as a dependent. A student who is not claimed as a dependent
can claim the credit on his or her own return, based on the expenses
paid by the student. In either case, amounts paid directly to the
school on the student's behalf by a third party, such as a
grandparent, are treated as paid by the student.
Other technical requirements may apply. Please call if you'd like to
discuss your eligibility for the credit and how to claim it.