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IRS.gov Website
Publication 970
taxmap/pubs/p970-011.htm#en_us_publink1000178139

Chapter 3
Lifetime Learning Credit(p20)

taxmap/pubs/p970-011.htm#TXMP28ce09c6Introduction

For 2011, there are two 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 and the lifetime learning credit. This chapter discusses the lifetime learning credit. The American opportunity credit is discussed in chapter 2, The American Opportunity Credit.
This chapter explains:
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What is the tax benefit of the lifetime learning credit.(p20)

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For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 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.
Deposit
You can choose the education benefit that will give you the lowest tax. You may want to compare the tuition and fees deduction ( chapter 6, Tuition and Fees Deduction) to either of the education credits.
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Can you claim more than one education credit this year.(p20)

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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 2011 tax return, you cannot, for that same child, also claim the American opportunity credit for 2011.
If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity 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 American opportunity credit for one student and the lifetime learning credit for another student in the same year.
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Differences between the American opportunity and lifetime learning credits.(p20)

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There are several differences between these two credits. For example, you can claim the American opportunity credit for the same student for no more than 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 these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2011 near the end of this publication.
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Overview of the lifetime learning credit.(p20)

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See Table 3-1, Overview of the Lifetime Learning Credit, for the basics of the lifetime learning credit. The details are discussed in this chapter.
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Can You Claim the Credit(p20)

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The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return.
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Who Can Claim the Credit(p20)

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Generally, you can claim the lifetime learning credit if all three of the following requirements are met.
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Table 3-1. Overview of the Lifetime Learning Credit

Maximum creditUp to $2,000 credit per return
Limit on modified adjusted gross income (MAGI)$122,000 if married filling jointly;
$61,000 if single, head of household, or qualifying widow(er)
Refundable or nonrefundableNonrefundable—credit limited to the amount of tax you must pay on your taxable income
Number of years of postsecondary educationAvailable for all years of postsecondary education and for courses to acquire or improve job skills
Number of tax years credit availableAvailable for an unlimited number of years
Type of degree requiredStudent does not need to be pursuing a degree or other recognized education credential
Number of coursesAvailable for one or more courses
Felony drug convictionFelony drug convictions are permitted
Qualified expensesTuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment)
Payments for academic periodsPayments made in 2011 for academic periods beginning in 2011 or beginning in the first 3 months of 2012
Note.Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you.
"Qualified education expenses" are defined later under Qualified Education Expenses. "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 3-1, Can You Claim the Lifetime Learning Credit for 2011, later, helpful in determining if you can claim a lifetime learning credit on your tax return.
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Who Cannot Claim the Credit(p21)

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You cannot claim the lifetime learning credit for 2011 if any of the following apply.