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Frequently Asked Tax Questions And Answers
Keyword: Lifetime Learning Credit
7.4 Child Care Credit/Other Credits : Hope & Life Time Learning Educational Credits
How does the Lifetime Learning Credit different from the Hope Credit?
Unlike the Hope Credit:
The Lifetime Learning Credit is not based on the student's workload. It
is allowed for one or more courses.
The credit is not limited to students in the first 2 years of postsecondary
education.
Expenses for graduate level degree work are eligible.
There is no maximum period for which the credit can be claimed for each
eligible student.
The amount you can claim as a credit does not vary (increase) based on
the number of eligible students for whom you pay qualified expenses.
References:
I finished my college sophomore year in June and began my junior
year in September. Can I take both the Hope and Lifetime Learning Credit in
that year?
No, you cannot take both credits in one year for the same student. However,
eligibility for the Hope Credit depends on your status at the beginning of
the calendar year. If you are classified as a second-semester sophomore during
the spring semester and as a first-semester junior during the fall semester
of that same year, the qualified expenses you pay for the fall semester may
be taken into account for the Hope Credit because you had not completed the
first 2 years of your secondary education when the year began.
References:
- Publication 970, Tax Benefits for Education
- Tax Topic 605, Education credits
- Ref (p. 35 of 8/28/01 S 25A draft final regs (ex 3); 25A
(b) (2) (c) )
How is the amount of the Hope or Lifetime Learning Credit determined?
The amount of the credit is determined by the amount you pay for qualified
tuition and related expenses paid for each eligible student and the amount
of your modified adjusted gross income (AGI).
References:
If I put money aside in a college savings plan for my two children,
is that money eligible for either the Hope or Lifetime Learning Credit?
No, an education credit is claimed in the year in which the expenses are
paid, not in the year in which money is set aside in a college savings plan.
You may want to consider setting up an Educational IRA. For more information,
refer to Publication 970, Tax Benefits for Education.
References:
Do I need to receive a Form 1098-T, Tuition Payments Statement,
from my children's colleges before I can file for the Hope Scholarship Credit
and the Lifetime Learning Tax Credit?
No, there is no requirement that you receive this form before you can claim
these credits.
References:
If tuition was paid by a government subsidized loan, can I still
take the Hope or Lifetime Learning Credit?
If you take out a loan to pay higher education expenses, those expenses
may qualify for the credit if you will be required to pay back the loan. The
credit is claimed in the year in which the expenses are paid, not in the year
in which the loan is repaid.
References:
If education expenses were paid by a school loan that the student
has not began paying back, do the expenses still qualify for the Hope or Lifetime
Learning Credits?
The rule for a school loan is the same as the rule for a government subsidized
loan. Even though the loan proceeds are not income to you, expenses paid from
the loan proceeds may qualify for the Hope or Lifetime Learning Credit if
the loan must be repaid. The education credit is claimed in the year in which
the expenses are paid, not in the year in which the loan is repaid.
References:
I filed my tax return via TeleFile and then I received a form from
my school stating that I was eligible for the Hope Scholarship and Lifetime
Learning Credits. What do I do now?
To claim the credit, you will need to file Form 1040X (PDF), Amended U.S. Individual Income Tax Return, and attach Form 8863 (PDF), Education Credits (Hope and Lifetime
Learning Credits).
References:
A divorced father pays college tuition directly to the college for
his child who is claimed as a dependent on his ex-wife's return. Is the divorced
father eligible for either of the educational credits - Hope or Lifetime Learning?
No. The divorced father cannot claim an educational credit because he does
not claim the child as a dependent. The ex-wife, however, can claim an educational
credit because she is claiming the child as a dependent and, under a special
rule, is treated as having paid the child's tuition. The child cannot claim
the credit because he is being claimed as a dependent on his mother's return.
References:
What is a Lifetime Learning Credit?
A nonrefundable tax credit up to $2,000 per family for all undergraduate
and graduate level education. Figured by taking 20% of the first $10,000 of
qualified educational expenses paid.
References:
Who is eligible for the Lifetime Learning Credit?
Generally, you can claim the lifetime learning credit if all
three of the following requirements are met.
You pay qualified tuition and related expenses of
higher education.
You pay the tuition and related expenses for an eligible
student.
The eligible student is either yourself, your spouse, or a dependent
for who you claim an exemption on your tax return.
The lifetime learning credit is based on qualified tuition and related
expenses you pay for yourself, your spouse, or a dependent for who you can
claim an exemption on your tax return. Generally, the credit is allowed for
qualified tuition and related expenses paid in 2003 for an academic
period beginning in 2003 or in the first 3 months of 2004.
For purposes of the lifetime learning credit, an eligible student is a
student who is enrolled in one or more courses at an eligible
educational institution.
An eligible educational institution is an college, university, vocational
school, or other postsecondary educational institution eligible to participate
in a student aid program administered by the Department of Education. It includes
virtually all accredited, public, nonprofit, and proprietary (privately owned
profit-making) postsecondary institutions. The educational institution should
be able to tell you if it is an eligible educational institution.
You cannot claim the lifetime learning credit if any of
the following apply.
Your filing status is married filing separately.
You are listed as a dependent in the Exemptions section
on another person's tax return (such as your parent's). See Who
Can Claim a Dependent's Expenses, later.
Your modified adjusted gross income is $51,000 or more ($103,000 or more
in the case of a joint return). Modified adjusted gross income is explained
later under Does the Amount of Your Income Affect the Amount
of Your Credit.
You (or your spouse) were a nonresident alien for any part of 2003 and
the nonresident alien did not elect to be treated as a resident for tax purposes.
More information on resident aliens can be found in Publication 519, U.S.
Tax Guide for Aliens.
You claim the Hope credit for the same student in 2003.
References:
I'm a full-time graduate student and am required pay a comprehensive
fee as part of my enrollment. This fee includes student center fees, health
fees, bus fees, and athletic fees. Does this comprehensive fee qualify for
the Lifetime Learning Credit?
If a student is required to pay a comprehensive fee to an eligible educational
institution that includes charges for tuition, fees, and personal expenses,
the portion of the comprehensive fee allocable to personal expenses is not
eligible for the credit. The allocation must be made by the institution using
a reasonable method.
References:
Is the Lifetime Learning Credit used only to reduce the tax people
owe or may it give me a refund even if I do not owe any tax?
Both the Hope Credit and the Lifetime Learning Credit are nonrefundable
credits. This means that the credits may reduce your federal income tax liability
down to zero. However, if you do not owe any tax, the credits will not result
in a refund.
References:
Can the Lifetime Learning Credit be used for a high school student
taking classes at an approved college prior to graduation from high school?
College courses taken while attending high school may qualify for the Hope
Scholarship Credit or for the Lifetime Learning Credit if the student meets
the qualifications for claiming either of the credits.
References:
What information on this Form 1098-T statement from my university
do I use to figure my Lifetime Learning Credit?
If you claim an education credit, keep Form 1098-T with your tax records.
The information on the form will not be used to figure the amount of your
credit. Instead, use Form 8863 (PDF), Education
Credits (Hope and Lifetime Learning Credits), to calculate your credit.
References:
Can nonresident aliens claim the Lifetime Learning Credit for tuition
paid to go to school?
If you are a nonresident alien for any part of the year, you generally
cannot claim the education credits. However, if you are married and choose
to file a joint return with a U.S. citizen or resident spouse, you may be
eligible for the Hope or Lifetime Learning Credit.
References:
I did not attend school this year, but made loan payments on a loan
I previously took out to pay my college tuition. Can I claim a lifetime credit
for the money I used to repay the loan?
No, payments on your student loans do not qualify for the Lifetime Learning
Credit. However, interest on student loans may be deductible for Federal income
tax purposes if you meet certain conditions. For more information, refer to Publication 970, Tax Benefits for Education.
References:
I am a student who is claimed as a dependent on my parent's tax
return. I pay my college tuition out of my own earnings. Can I take the Lifetime
Learning Credit on my tax return?
No, if your parents claim you as a dependent, you cannot claim either of
the education credits. However, any qualifying tuition payments that you made
can be claimed by your parents as paid by themselves and may qualify them
for the Hope or Lifetime Learning Credit.
References:
Am I eligible to claim both my job education expenses (minus 2 percent
of AGI) and the Lifetime Learning Credit on my taxes?
You can not deduct educational expenses and claim a credit for the same
expenses. You must choose one or the other.
References:
If my employer reimbursed my education expenses and included the
reimbursement in my taxable income, is the amount still eligible for the Lifetime
Learning Credit?
The amount included as taxable income is eligible for the Lifetime Learning
Credit. If your tuition is paid by your employer but is not included
in your taxable income, then the amount of the tuition is ineligible for the
education credit. This is because double tax benefits are not allowed.
References:
I am trying to understand what is a qualified expense under the
Lifetime Learning Credit. The guidelines state that books are included in
qualified expenses only if the fee must be paid to the institution as a condition
of enrollment or attendance at the institution. I am required to have books
for classes that I am taking, and I purchased the books from the college bookstore.
Can I add the cost of these books to my qualified expenses?
In general, an educational credit is not available for expenses incurred
to pay for books. The Federal Income Tax Regulations provide an example that
may be helpful: First-year students at College W are required to obtain books
and other reading materials used in its mandatory first-year curriculum. The
books and other reading materials are not required to be purchased from College
W and may be borrowed from other students or purchased from off-campus bookstores,
as well as from College W's bookstore. College W bills students for any books
and materials purchased from College W's bookstore. The fee that College W
charges for the first-year books and materials purchased at its bookstore
is not a qualified tuition and related expense because the books and materials
are not required to be purchased from College W for enrollment or attendance
at the institution.
References:
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