A family may claim a tax credit of up to $1,000 per tax year (until January 1, 2003) and $2,000 per tax year (after that date) for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of tax years. A family may claim up to 20% of $5,000 of eligible expenses for expenses paid after June 30, 1998 and prior to January 1, 2003, and up to 20% of $10,000 of eligible expenses (for expenses paid January 1, 2003 and after). The credit is not available for taxpayers whose tax return filing status is married filing separately.

The actual amount of the credit depends on the family's income, the amount of qualified tuition and fees paid, and the amount of certain tax credits and allowances subtracted from tuition. This credit is family-based (e.g., $1,000 per family) rather than dependent-based like the Hope credit.

2. Who Qualifies?
The Taxpayer: An eligible taxpayer must file a tax return and owe taxes to claim the credit. The taxpayer must also claim the eligible student as a dependent unless the credit is for the taxpayer or the taxpayer's spouse. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income (AGI) of up to $41,000 for a single taxpayer (or $82,000 for married taxpayers). The credit amount is phased out between $41,000 and $51,000 for single taxpayers (or $82,000 and $102,000 for married taxpayers).

The Student: An eligible student may be enrolled at least half time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student's job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer.

3. How Do You Get The Credit?
To qualify for the credit, the taxpayer must report the amount of qualified tuition and fees paid, as well as the amount of certain Tax Credits, grants, and untaxed income used to pay the tuition and fees. Current law specifies that schools will supply this information in the form of a "return" to individual taxpayers and to the IRS. However, reporting dollar amounts to the IRS is not required at this time. More information about the return will be available after the Treasury Department issues regulations to implement this law.

4. When Is The Credit Available?
The taxpayer may claim the Lifetime Learning credit for qualified expenses paid during the relevant reporting period.

5. Can A Family Claim Multiple Benefits?
A family may claim a Lifetime Learning credit, a Hope credit, and an exclusion from gross income for certain distributions from qualified State tuition programs or Coverdell Educational Savings Account (formerly Education IRA), as long as the same student is not used as the basis for each credit or exclusion and the family does not exceed the Lifetime Learning maximum per family

6. What Are The Qualified Expenses?

Generally, qualified expenses are amounts paid for tuition and fees required for the student’s enrollment or attendance at an eligible educational institution. It does not matter whether the expenses were paid in cash, by check, by credit card, or with borrowed funds.

Qualified expenses do not include amounts paid for:

● Course-related books, supplies, equipment, and nonacademic activities, except for fees required to be paid to the institution as a condition of enrollment or attendance.

● Room and board, insurance, medical expenses (including student health fees), transportation, or other similar personal, living, or family expenses. 

● Any course or other education involving sports, games, or hobbies, unless such course or other education is part of the student’s degree program or (for the lifetime learning credit only) helps the student to acquire or improve job skills.

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