The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. The maximum amount of lifetime learning credit you can claim for 2009 is $2,000 (20% × $10,000). However, that amount may be reduced based on your MAGI. See Effect of the Amount of Your Income on the Amount of Your Credit
on the next page.
For students in Midwestern disaster areas, the credit rate is modified to 40% of qualified expenses paid, with a maximum lifetime learning credit allowed on your return of $4,000. If you are claiming a lifetime learning credit for both students in a Midwestern disaster area and other students, the qualified education expenses taken into account for other students cannot exceed $10,000 reduced by the qualified education expenses of the students in the Midwestern disaster areas.taxmap/pubs/p970-023.htm#en_us_publink1000178210
Bruce and Toni Harper are married and file a joint tax return. For 2009, their MAGI is $75,000. Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. The college is not in a Midwestern disaster area. She already has a bachelor's degree in history and wants to become a nurse. In August 2009, Toni paid $5,000 of qualified education expenses for her fall 2009 semester. Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2009 joint tax return.taxmap/pubs/p970-023.htm#en_us_publink1000220604
The facts are the same as Example 1, except that Bruce and Toni have a child attending college in a Midwestern disaster area. They paid $6,500 of qualified education expenses for the child's fall 2009 semester. Bruce and Toni can claim a lifetime learning credit of $3,300 on their 2009 joint tax return. Their credit is figured on Form 8863 as follows. First, the amount of credit for their daughter (attending a school in a Midwestern disaster area) is figured as $2,600 ($6,500 x .40). Second, the amount of credit for Toni is figured. As they have already used $6,500 expenses in figuring the credit for their daughter, they are limited to $3,500 ($10,000 limit − $6,500). The credit for Toni's expenses is $700 ($3,500 x .20). Their total lifetime learning credit is $3,300 ($2,600 + $700).taxmap/pubs/p970-023.htm#en_us_publink1000178211
To help you figure your lifetime learning credit, you should receive Form 1098-T
. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by February 1, 2010. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you actually paid. When figuring the credit, use only the amounts you paid or were deemed to have paid in 2009 for qualified education expenses.
In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time or were a graduate student.
The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.taxmap/pubs/p970-023.htm#en_us_publink1000178212
The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a lifetime learning credit if your MAGI is $60,000 or more ($120,000 or more if you file a joint return). taxmap/pubs/p970-023.htm#en_us_publink1000178213
For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.taxmap/pubs/p970-023.htm#en_us_publink1000178214
If you file Form 1040A, your MAGI is the AGI on line 22 of that form.taxmap/pubs/p970-023.htm#en_us_publink1000178215
If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:
- Foreign earned income exclusion,
- Foreign housing exclusion,
- Foreign housing deduction,
- Exclusion of income by bona fide residents of American Samoa, and
- Exclusion of income by bona fide residents of Puerto Rico.
You can use Worksheet 4-1 to figure your MAGI.
Worksheet 4-1. MAGI for the Lifetime
|1.||Enter your adjusted gross income |
(Form 1040, line 38)
| ||1.|| |
|2.||Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)|| ||2.|| || || |
|3.||Enter your foreign housing deduction (Form 2555, line 50)|| ||3.|| || || |
|4.||Enter the amount of income from Puerto Rico you are excluding|| ||4.|| || || |
|5.||Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)|| ||5.|| || || |
|6.||Add the amounts on|
lines 2, 3, 4, and 5
| ||6.|| |
|7.||Add the amounts on lines 1 and 6. |
This is your modified adjusted
gross income. Enter this amount
on Form 8863, line 20
| ||7.|| |
If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 17–29 of Form 8863. The same method is shown in the following example.taxmap/pubs/p970-023.htm#en_us_publink1000178219
You are filing a joint return with a MAGI of $110,000. In 2009, you paid $6,600 of qualified education expenses.
You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). The result is a $1,320 (20% x $6,600) tentative credit.
Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. The numerator of the fraction is $120,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator is $20,000, the range of incomes for the phaseout ($100,000 to $120,000). The result is the amount of your phased out (reduced) lifetime learning credit ($660).
| ||$1,320||×|| $120,000 − $110,000 |