The Costs & Rewards of a College Education

Part 7 - Tax Incentives for Higher Education Expenses: The Lifetime Learning Credit

The lifetime learning credit provides a tax credit of 20% of up to $10,000, or up to $2,000, of qualified expenses per taxpayer per year.  It is available for all years of post-secondary education and for courses taken to acquire or improve job skills.  This credit is available even if the student is enrolled in just one course at an eligible institution.  There is no limit on the number of years the lifetime learning credit can be claimed for each student.

Generally, the same expenses that either qualify or do not qualify for the Hope credit apply to the lifetime learning credit.  See the summary of these expenses in the Hope credit summary above.  Additionally, the same prohibited actions for the Hope credit applies to the lifetime learning credit.

You cannot claim the Hope and the lifetime learning credit for the same student in the same year.  To claim the Hope Credit or Lifetime Learning Credit, complete IRS Form 8863.

Comparison of Education Credits

Amount of Credit      
Hope Credit - Up to $1,800 credit per eligible student 1
Lifetime Learning Credit - Up to $2,000 credit per return

When Available
Hope Credit - Available ONLY until the first 2 years of post- secondary education are completed.1
Lifetime Learning Credit - Available for all years of post-secondary education and for courses to acquire or improve job skills.

Educational Pursuit  
Hope Credit - Student must be pursuing an undergraduate degree or other recognized education credential.
Lifetime Learning Credit - Student does not need to be pursuing a degree or other recognized education credential

Enrollment Requirements
Hope Credit - Student must be enrolled at least half time for at least one academic period beginning during the year.
Lifetime Learning Credit - Available for one or more courses

Prior Legal Issues
Hope Credit - No felony drug conviction on student’s record.
Lifetime Learning Credit - Felony drug conviction rule does not apply

1    For 2009 and 2010, these features fall under the provisions of the American Opportunity Tax Credit.  Please refer to these features as described in the Hope Credit section of this report.


Next week I will begin discussing the basics of financial aid, including discussions on grants, loans, and steps to take now to increase your chances of obtaining financial aid for yourself or your child.