Alarm
Extension filers: Only left to file your taxes by October 17
Open
Hide Arrow

TurboTax / Tax Calculators & Tips / All Tax Guides / Tax Deductions and Credits / How to Calculate Your Lifetime Learning Tax Credit on IRS Form 8863

How to Calculate Your Lifetime Learning Tax Credit on IRS Form 8863

Updated for Tax Year 2015


OVERVIEW

Tax credits like the Lifetime Learning Tax Credit (LLTC) provide a dollar-for-dollar reduction of your taxes owed, rather than the reduction in your taxable income that is offered by a deduction. You must qualify according to Internal Revenue Service criteria before you can claim the LLTC.


The Lifetime Learning Tax Credit is one of many provisions in the U.S. tax code that provides benefits to low- and middle-income taxpayers. As a credit, the LLTC is more beneficial than a simple deduction. Tax credits like the LLTC provide a dollar-for-dollar reduction of your taxes owed, rather than the reduction in your taxable income that is offered by a deduction. You must qualify according to Internal Revenue Service criteria before you can claim the LLTC.

Definition of qualified educational expenses

If you have qualified educational expenses, the Lifetime Learning Tax Credit can provide you with a credit of up to 20 percent of those costs. For purposes of the credit, qualified educational expenses are generally limited to tuition and fees for you, your spouse or your dependents. If the purchase of books, supplies or equipment is necessary for enrollment, those costs may be included as well.

Common expenses such as room and board, transportation and nonacademic costs are not eligible for this credit. The maximum credit you can claim per year is $2,000, based on $10,000 in qualifying expenses.

Phase-out for higher-income taxpayers

Like many tax credits and deductions, the lifetime learning credit phases out for higher-income taxpayers. As of 2015, the LLTC phases out between $55,000 and $65,000 of modified adjusted gross income for single taxpayers. With an MAGI of $65,000 or higher, you can't claim any credit as a single taxpayer. The range for joint filers is doubled, with the credit phasing out between $110,000 and $130,000 of MAGI.

Using Form 8863

Form 8863 is a two-page form used for computing educational tax credits. If you use the form to calculate your LLTC, you can skip Part I and start with Part II, which begins on line 3.

To compute the amount of your LLTC, enter the name, Social Security number, and qualified expenses of each applicable student. Enter $10,000 or your actual expenses, whichever is smaller, then multiply this number by 20 percent. That amount is your tentative LLTC. From there, skip ahead to Part IV of the form. This section of the form determines whether or not your credit will be diminished by the amount of your MAGI. If no modification is necessary, your tentative LLTC becomes the final amount of your credit.

When you use TurboTax to prepare your taxes, we’ll handle all of these calculations for you. Just answer some simple questions about your education expenses and we’ll calculate exactly how much of the credit you qualify for.

American Opportunity credit

The American Opportunity Credit is another popular educational credit that you can claim using Form 8863. As with the LLTC, you can claim the American Opportunity credit for yourself, your spouse or your dependents with qualifying educational expenses while pursuing an undergraduate degree. The American Opportunity credit has a higher limit than the Lifetime Learning credit, at $2,500, and the phase-out begins at higher MAGI levels as well.

Another important distinction between the two credits is that up to 40 percent of the American Opportunity credit is refundable, meaning you can actually receive money back if the amount of the credit exceeds your tax liability. The Lifetime Learning credit, on the other hand, is nonrefundable, so you can claim a credit only up to the amount of the overall tax you owe.

If you claim the American Opportunity credit for a student in a given year, you cannot also claim the Lifetime Learning credit for the same student. You also can't claim the American Opportunity credit for more than four years for a particular student.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Filing Deadline: IRS filing deadline for tax year 2015 is April 18, 2016 (except for residents of Massachusetts or Maine, where the IRS filing deadline for tax year 2015 is April 19, 2016).
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except the TurboTax Home & Business/QuickBooks Self-Employed bundle offers.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.