by Lori Kaye

Created on: August 05, 2009

Good news! If you, or a family member, are a college student, an overview of the Lifetime Learning Tax Credit might help lower the taxes you owe this year. If you find that you qualify, you could lower your taxes by up to $2000 dollars!

The Lifetime Learning Tax Credit is one of two tax benefits offered by the I.R.S. The second program is the Hope Scholarship Credit, which is available for a student's first two years while enrolled at least half-time and pursuing a degree.

Who is Eligible?

If you, your spouse, or your child is a U.S. citizen and enrolled in at least one college course, you can take the credit. Check with your college to be certain that they're an 'eligible' institution. Most accredited schools qualify, but if your college is extremely small, or new, you should check with your administration office.

The Lifetime Learning Tax Credit is available for individuals with an income below $58,000. If you're married and filing jointly, then your income must be below $116,000.

Beginning in 2008, the credit will be slowly phased out for individual returns between $48,000 - $58,000 or joint returns between $96,000 - $116,000. If you fall within these ranges, you can still take the credit, but you won't receive the full $2,000.

The credit can only be claimed on one tax form, so a parent can claim themselves, and each dependent child. An unmarried, full-time student, up to age 24, can be claimed as a dependent if the parents are paying college expenses.

You can claim the credit for each member of your household who is attending college. The combined credit is 20% of your allowed expenses, or $2,000 (whichever is lowest).

What Expenses Can be Deducted?

Many college expenses can be claimed as part of the Lifetime Learning Tax Credit deduction. Tuition and fees can be deducted. Textbooks and materials required by a class which are billed as part of the fees can be claimed. However, if you're allowed to purchase them elsewhere, then you can't claim them.

Teachers or other professionals getting their c.e.u.'s (or continuing education units) are eligible. So are other classes that directly benefit your job. For example, if you're a mechanic and you want to take a class in diesel mechanics, then that qualifies!

Keep in mind that not all classes qualify for the credit. If you're taking a belly dancing class, it probably won't count. However, if you're working on your associate's degree at that same college, and you're taking the belly dancing class as part of your degree plan, then it counts!

At the end of the tax year, the college should send you tax form 1098-T, which breaks down your payments, and shows exactly what is eligible. If you don't receive this form, go to the college administration office for help.

Each year, as you sit down to figure out your income taxes, remember those golden words: "LIFETIME Learning Tax Credit." The key word is 'lifetime.' As long as you remain eligible, you can take college classes and claim them on your tax return.

Learn more about this author, Lori Kaye.
Click here to send this author comments or questions.