The amount of your lifetime learning credit for 2009 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a credit if your MAGI is $60,000 or more ($120,000 or more if you file a joint return). This is an increase from the 2008 limits of $48,000 and $58,000 ($96,000 and $116,000 if filing a joint return). See Effect of the Amount of Your Income on the Amount of Your Credit, later, for more information.

For 2009, there are three tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American opportunity credit, the Hope credit, and the lifetime learning credit. This chapter discusses the lifetime learning credit. The American opportunity credit is discussed in chapter 2. The Hope credit is discussed in chapter 3.

This chapter explains:

• Who can claim the lifetime learning credit,
• What expenses qualify for the credit,
• Who is an eligible student,
• Who can claim a dependent's expenses,
• How to figure the credit,
• How to claim the credit, and
• When the credit must be repaid.

For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 ($4,000 for students in Midwestern disaster areas) for qualified education expenses paid for all eligible students. There is no limit on the number of years the lifetime learning credit can be claimed for each student.

A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. The lifetime learning credit is a nonrefundable credit. This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you.

Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax.

To qualify for the special rules, a student must attend an eligible educational institution in a Midwestern disaster area. See Table 4-2 at the end of this chapter for a list of qualifying disaster areas. For the expanded definition of qualified education expenses, see Students in Midwestern disaster areas, under Qualified Education Expenses, later in this chapter.

For each student, you can elect for any year only one of the credits. For example, if you elect to take the lifetime learning credit for a child on your 2009 tax return, you cannot, for that same child, also claim the Hope credit or an American opportunity credit for 2009.

If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit (or the Hope credit) for the same student in the same year, you can choose to claim either credit, but not both.

If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. This means that, for example, you can claim the Hope credit (or the American opportunity credit) for one student and the lifetime learning credit for another student in the same year. However, this does not apply when the choice is between the American opportunity credit and the Hope credit. See this section in chapter 2 (American opportunity credit) or chapter 3 (Hope credit).

There are several differences between these three credits. For example, you can claim the Hope credit based on the same student's expenses for no more than 2 tax years. The American opportunity credit can be claimed for the same student for no more 4 tax years, but any year in which the Hope credit was claimed counts toward the 4 years. However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. The differences between the three credits are shown in Appendix B near the end of this publication.

See Table 4-1 (on the next page) for the basics of the lifetime learning credit. The details are discussed in this chapter.

The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return.

Generally, you can claim the lifetime learning credit if all three of the following requirements are met.

• You pay qualified education expenses of higher education.
• You pay the education expenses for an eligible student.
• The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

"Qualified Education Expenses" are defined on this page. "Eligible students" are defined later under Who Is an Eligible Student. A "dependent for whom you claim an exemption" is defined later under Who Can Claim a Dependent's Expenses.

You may find Figure 4-1, on the next page, helpful in determining if you can claim a lifetime learning credit on your tax return.

You cannot claim the lifetime learning credit for 2009 if any of the following apply.

• Your filing status is married filing separately.
• You are listed as a dependent in the Exemptions section on another person's tax return (such as your parents'). See Who Can Claim a Dependent's Expenses, later.
• Your modified adjusted gross income (MAGI) is $60,000 or more ($120,000 or more in the case of a joint return). MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit.
• You (or your spouse) were a nonresident alien for any part of 2009 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
• You claim the American opportunity credit, Hope credit, or a tuition and fees deduction for the same student in 2009.