Education tax credits are not just for traditional undergraduates. The Lifetime Learning Credit helps pay for graduate school, professional degrees, and even individual courses taken to build job skills. Unlike the American Opportunity Tax Credit, it has no limit on the number of years you can claim it. This guide explains how the credit works, who qualifies, and how to claim it correctly.
How the credit works
The Lifetime Learning Credit equals 20% of the first $10,000 of qualified education expenses paid during the year, for a maximum of $2,000 per tax return. The limit is per return, not per student, so a family with multiple students cannot claim more than $2,000 in total through this credit.
The credit is nonrefundable. It can reduce your federal income tax to zero, but any excess is not paid to you as a refund.
Who can claim it
You may claim the credit if:
- You, your spouse, or a dependent you claim was enrolled at an eligible educational institution.
- You paid qualified education expenses for that student during the tax year.
- Your filing status is not married filing separately.
- You are not claimed as a dependent on someone else’s return.
- Your income is below the phase-out limit.
Unlike the American Opportunity Tax Credit, the student does not need to be pursuing a degree, enrolled at least half time, or in the first four years of college. There is also no felony drug conviction restriction.
Eligible institutions and courses
An eligible institution is generally any college, university, vocational school, or other postsecondary institution eligible to participate in federal student aid programs. Most accredited public, nonprofit, and for-profit postsecondary schools qualify.
Courses qualify if they are part of a postsecondary degree program or are taken to acquire or improve job skills. That includes:
- Graduate and professional school
- Undergraduate courses beyond the first four years
- Part-time study
- Continuing education and certificate courses at eligible institutions
Courses involving sports, games, or hobbies generally do not qualify unless they are part of a degree program.
Qualified expenses
Qualified expenses include tuition and fees required for enrollment or attendance, including required fees for course materials paid to the institution.
Not qualified:
- Room and board
- Insurance and medical expenses
- Transportation
- Personal and living expenses
- Books and supplies not required to be paid to the school as a condition of enrollment
Expenses must be reduced by tax-free educational assistance, such as scholarships, Pell Grants, employer-provided educational assistance, and veterans’ education benefits.
Income limits
The credit phases out based on modified adjusted gross income (MAGI):
| Filing status | Full credit if MAGI is | No credit if MAGI is |
|---|---|---|
| Single, head of household, qualifying surviving spouse | $80,000 or less | $90,000 or more |
| Married filing jointly | $160,000 or less | $180,000 or more |
These thresholds were set by law starting in 2021 and are the same as those for the American Opportunity Tax Credit. Check the current Form 8863 instructions before filing.
Lifetime Learning Credit vs. American Opportunity Tax Credit
| Feature | Lifetime Learning Credit | American Opportunity Tax Credit |
|---|---|---|
| Maximum credit | $2,000 per return | $2,500 per student |
| Refundable | No | Up to 40% ($1,000) |
| Years available | Unlimited | First four years of postsecondary education, four tax years |
| Enrollment requirement | One or more courses | At least half time in a degree program |
| Books and supplies | Only if paid to the school as required | Required course materials, wherever purchased |
You cannot claim both credits for the same student in the same year. You can, however, claim the AOTC for one student and the Lifetime Learning Credit for another student on the same return. For undergraduates in their first four years, the AOTC is usually more valuable.
How to claim the credit
- Get Form 1098-T from the institution. It reports payments and scholarships. Schools generally must provide it by January 31.
- Reconcile the form with your records. Box 1 shows payments received for qualified tuition and related expenses; compare it to your receipts and account statements.
- Complete Form 8863, Education Credits, and attach it to Form 1040.
- Keep records, including receipts, account statements, and scholarship letters.
You generally need a Form 1098-T to claim the credit, though exceptions exist in limited circumstances.
Coordinating with other education benefits
You cannot use the same expenses for more than one benefit. Common interactions include:
- 529 plan withdrawals. Expenses used to claim the credit cannot also be treated as qualified expenses for a tax-free 529 withdrawal. Families often allocate the first $10,000 of tuition to the credit and use 529 funds for remaining costs, including room and board.
- Employer educational assistance. Tax-free employer assistance, up to $5,250 per year under Section 127, reduces qualified expenses.
- Tuition paid with student loans. Expenses paid with loan proceeds can count in the year paid.
Examples
Graduate student. Priya is in a master’s program and pays $14,000 in tuition. Her MAGI is $60,000 and she files single. She can claim the full $2,000 credit.
Career changer. Marcus takes two coding courses at a community college for $3,000 to improve job skills. He is not in a degree program. He can claim 20% of $3,000, or $600, if his income is under the threshold.
Family with two students. A couple pays $6,000 for one child’s freshman year and $12,000 for another child’s graduate program. They can claim the AOTC for the freshman, up to $2,500, and the Lifetime Learning Credit for the graduate student, up to $2,000.
Common mistakes
- Claiming the credit for room and board
- Claiming more than $2,000 for multiple students
- Using the same expenses for a 529 withdrawal
- Filing married filing separately
- Claiming the credit for a student claimed as a dependent on another return
Who claims the credit for a dependent student
If parents claim a student as a dependent, only the parents can claim the education credit for that student, even if the student paid the tuition. Expenses the student pays are treated as paid by the parents for this purpose. If the parents do not claim the student as a dependent, the student may be able to claim the credit, provided no one else can claim the student. Families near the income phase-out sometimes compare both scenarios, because a student with little tax liability may get less value from a nonrefundable credit.
Timing of payments
The credit is based on expenses paid during the tax year for academic periods beginning in that year or in the first three months of the next year. For example, tuition paid in December for a spring term starting in January can count in the year paid. You cannot claim the same expenses again the following year. Timing payments thoughtfully can help keep annual expenses near the $10,000 maximum.
Records to keep
Keep copies of Form 1098-T, tuition statements, receipts for required fees, scholarship award letters, and any employer reimbursement records for at least three years after filing.
Is it worth claiming for a small course?
Even modest expenses can produce a meaningful credit. A $1,500 professional certificate course yields a $300 credit for an eligible taxpayer, which directly reduces tax owed. Because there is no lifetime limit on the number of years, workers who take a course every year can claim the credit repeatedly.
Related reading: The Student Aid Index: What It Measures and How It Shapes Your Financial Aid Offer.
Frequently Asked Questions
How much is the Lifetime Learning Credit?
It is 20% of up to $10,000 of qualified expenses, for a maximum of $2,000 per tax return.
Can I claim the Lifetime Learning Credit for graduate school?
Yes. Graduate and professional programs qualify, and there is no limit on the number of years.
Is the Lifetime Learning Credit refundable?
No. It can reduce your tax to zero but will not generate a refund.
Can I claim it for a single course?
Yes, if the course is taken at an eligible institution to acquire or improve job skills or is part of a degree program.
Can I claim both education credits?
Not for the same student in the same year, but you can claim different credits for different students on one return.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
