skip navigation

Search Help
Navigation Help

Tax Map Index
ABCDEFGHI
JKLMNOPQR
STUVWXYZ#

International
Tax Topic Index

Affordable Care Act
Tax Topic Index

FAQs
Forms
Publications
Tax Topics

Comments
About Tax Map

IRS.gov Website
Publication 970
taxmap/pubs/p970-010.htm#en_us_publink1000178164

What Expenses Qualify? (p22)

rule
The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2014 for an academic period beginning in 2014 or in the first 3 months of 2015.
For example, if you paid $1,500 in December 2014 for qualified tuition for the spring 2015 semester beginning in January 2015, you may be able to use that $1,500 in figuring your 2014 credit.
taxmap/pubs/p970-010.htm#en_us_publink1000178165

Academic period.(p22)

rule
An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period.
taxmap/pubs/p970-010.htm#en_us_publink1000178166

Paid with borrowed funds.(p22)

rule
You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account.
taxmap/pubs/p970-010.htm#en_us_publink1000178167

Student withdraws from class(es).(p22)

rule
You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws.
taxmap/pubs/p970-010.htm#en_us_publink1000178168

Qualified Education Expenses(p22)

rule
For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.
taxmap/pubs/p970-010.htm#en_us_publink1000178169

Eligible educational institution.(p22)

rule
An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.
Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.
taxmap/pubs/p970-010.htm#en_us_publink1000178170

Related expenses.(p23)

rule
Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance.
taxmap/pubs/p970-010.htm#en_us_publink1000298870

Prepaid expenses.(p23)

rule
Qualified education expenses paid in 2014 for an academic period that begins in the first three months of 2015 can be used in figuring an education credit for 2014 only. See Academic period, earlier. For example, you pay $2,000 in December 2014 for qualified tuition for the 2015 winter quarter that begins in January 2015, you can use that $2,000 in figuring an education credit for 2014 only (if you meet all the other requirements).
EIC
You cannot use any amount you paid in 2013 or 2015 to figure the qualified education expenses you use to figure your 2014 education credit(s).
In the following examples, assume that each student is an eligible student at an eligible educational institution.
taxmap/pubs/p970-010.htm#en_us_publink1000268863
Example 1.(p23)
Jackson is a sophomore in University V's degree program in dentistry. This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense.
taxmap/pubs/p970-010.htm#en_us_publink1000268864
Example 2.(p23)
Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W's bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
taxmap/pubs/p970-010.htm#en_us_publink1000268865
Example 3.(p23)
When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified expense.
taxmap/pubs/p970-010.htm#en_us_publink1000178173

No Double Benefit Allowed(p23)

rule
You cannot do any of the following:
taxmap/pubs/p970-010.htm#en_us_publink1000178177

taxmap/pubs/p970-010.htm#en_us_publink1000236166
taxmap/pubs/p970-010.htm#en_us_publink1000178179

Adjustments to Qualified Education Expenses(p23)

rule
For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.
taxmap/pubs/p970-010.htm#en_us_publink1000178180

Tax-free educational assistance.(p23)

rule
For tax-free educational assistance received in 2014, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. See Academic period, earlier.
Some tax-free educational assistance received after 2014 may be treated as a refund of qualified education expenses paid in 2014. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2014 for qualified education expenses paid on behalf of a student in 2014 (or attributable to enrollment at an eligible educational institution during 2014).
If this tax-free educational assistance is received after 2014 but before you file your 2014 income tax return, see Refunds received after 2014 but before your income tax return is filed, later. If this tax-free educational assistance is received after 2014 and after you file your 2014 income tax return, see Refunds received after 2014 and after your income tax return is filed, later.
Tax-free educational assistance includes:
Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true.
Deposit
You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. For examples, see Coordination with Pell grants and other scholarships, later.
taxmap/pubs/p970-010.htm#en_us_publink1000294214

Refunds.(p25)

rule
A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2014 may be treated as a refund. See Tax-free educational assistance, earlier.
taxmap/pubs/p970-010.htm#en_us_publink1000294215
Refunds received in 2014.(p25)
For each student, figure the adjusted qualified education expenses for 2014 by adding all the qualified education expenses for 2014 and subtracting any refunds of those expenses received from the eligible educational institution during 2014.
taxmap/pubs/p970-010.htm#en_us_publink1000294216
Refunds received after 2014 but before your income tax return is filed.(p25)
If anyone receives a refund after 2014 of qualified education expenses paid on behalf of a student in 2014 and the refund is paid before you file an income tax return for 2014, the amount of qualified education expenses for 2014 is reduced by the amount of the refund.
taxmap/pubs/p970-010.htm#en_us_publink1000294217
Refunds received after 2014 and after your income tax return is filed.(p25)
If anyone receives a refund after 2014 of qualified education expenses paid on behalf of a student in 2014 and the refund is paid after you file an income tax return for 2014, you may need to repay some or all of the credit. See Credit recapture, next.
taxmap/pubs/p970-010.htm#en_us_publink1000297714

Credit recapture.(p25)

rule
If any tax-free educational assistance for the qualified education expenses paid in 2014 or any refund of your qualified education expenses paid in 2014 is received after you file your 2014 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2014 by reducing the expenses by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2014 and figure the amount by which your 2014 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.
taxmap/pubs/p970-010.htm#en_us_publink1000297715
Example.(p25)
You pay $9,300 in tuition and fees in December 2014, and your child began college in January 2015. You filed your 2014 tax return on February 14, 2015, and claimed a lifetime learning credit of $1,860. You claimed no other tax credits. After you filed your return, your child withdrew from two courses and you received a refund of $2,900. You must refigure your 2014 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. The refigured credit is $1,280 and your tax liability increased by $580. See instructions for your 2015 income tax return to determine where to include this tax.
Deposit
If you pay qualified education expenses in 2015 for an academic period that begins in the first 3 months of 2015 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2015 instead of reducing your expenses for 2014.
taxmap/pubs/p970-010.htm#en_us_publink1000178189

Amounts that do not reduce qualified education expenses.(p25)

rule
Do not reduce qualified education expenses by amounts paid with funds the student receives as:
Do not reduce the qualified education expenses by any scholarship or fellowship grant reported as income on the student's tax return in the following situations. For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit.
taxmap/pubs/p970-010.htm#en_us_publink1000300231

Coordination with Pell grants and other scholarships.(p26)

rule
You may be able to increase your lifetime learning credit when the student (you, your spouse, or your dependent) includes certain scholarships or fellowship grants in the student’s gross income. Your credit may increase only if the amount of the student’s qualified education expenses minus the total amount of scholarships and fellowship grants is less than $10,000. If this situation applies, consider including some or all of the scholarship or fellowship grant in the student’s income in order to treat the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that are not qualified education expenses such as tuition and related fees.
Scholarships and fellowship grants that the student includes in income do not reduce the student’s qualified education expenses available to figure your lifetime learning credit. Thus, including enough scholarship or fellowship grant in the student’s income to report up to $10,000 in qualified education expenses for your lifetime learning credit may increase the credit by enough to increase your tax refund or reduce the amount of tax you owe even considering any increased tax liability from the additional income. However, the increase in tax liability as well as the loss of other tax credits may be greater than the additional lifetime learning credit and may cause your tax refund to decrease or the amount of tax you owe to increase. Your specific circumstances will determine what amount, if any, of scholarship or fellowship grant to include in income to maximize your tax refund or minimize the amount of tax you owe.
The scholarship or fellowship grant must be one that may qualify as a tax-free scholarship under the rules discussed in chapter 1. Also, the scholarship or fellowship grant must be one that may (by its terms) be used for nonqualified expenses. Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expenses cannot exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This amount may differ from the student’s living expenses estimated by the student’s school in computing the official cost of attendance under student aid rules.
The fact that the educational institution applies the scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, does not prevent the student from choosing to apply certain scholarships or fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the part of the scholarship or fellowship grant applied to the student’s nonqualified expenses in income), the student may increase taxable income and may be required to file a tax return. But, this allows payments made in cash, by check, by credit or debit card, or with borrowed funds such as a student loan to be applied to qualified education expenses.
taxmap/pubs/p970-010.htm#en_us_publink1000300232

Example 1—No scholarship.(p26)

Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Her adjusted gross income (AGI) and her MAGI, for purposes of the credit, are $27,400. Judy claims the standard deduction of $6,200 and personal exemption of $3,950, resulting in taxable income of $17,250 and a tax liability before credits of $2,138. Judy claims no credits other than the lifetime learning credit. In July 2014, she paid $700 for the summer 2014 semester; in August 2014, she paid $1,900 for the fall 2014 semester; and in December 2014, she paid another $1,900 for the spring semester beginning in January 2015. Judy and the college meet all requirements for the lifetime learning credit. She can use all of the $4,500 tuition she paid in 2014 when figuring her 2014 lifetime learning credit. She claims a $900 lifetime learning credit and her tax liability after credits is $1,238.
taxmap/pubs/p970-010.htm#en_us_publink1000300233

Example 2—Scholarship excluded from income.(p26)

The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) to have applied the scholarship to pay for tuition, required fees, and course materials. Only $3,000 of the $4,500 tuition she paid in 2014 could be used when figuring her 2014 lifetime learning credit. Her lifetime learning credit would be reduced to $600 and her tax liability after credits would be $1,538.
taxmap/pubs/p970-010.htm#en_us_publink1000300234

Example 3—Scholarship included in income.(p26)

The facts are the same as in Example 2—Scholarship excluded from income. If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have applied the entire scholarship to pay for room and board. Judy's AGI and MAGI would increase to $28,900, her taxable income would be $18,750, and her tax liability before credits would be $2,363. She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. Judy could claim a $900 lifetime learning credit and her tax liability after credits would be $1,463.
taxmap/pubs/p970-010.htm#en_us_publink100025380

Example 4—Scholarship applied by the postsecondary school to tuition.(p26)

The facts are the same as in Example 3—Scholarship included in income, except the $1,500 scholarship is paid directly to the public community college. The fact that the public community college applies the scholarship to Judy's tuition and related fees does not prevent Judy from including the $1,500 scholarship in income. As in Example 3, by doing so, she will be deemed to have applied the entire scholarship to pay for room and board. Judy could claim the $900 lifetime learning credit and her tax liability after credits would be $1,463.
Note.Whether you will benefit from applying a scholarship or fellowship grant to nonqualified expenses will depend on the amount of the student’s qualified education expenses, the amount of the scholarship or fellowship grant, and whether the scholarship or fellowship grant may (by its terms) be used for nonqualified expenses. Any benefit will also depend on the student’s federal and state marginal tax rates as well as any federal and state tax credits the student claims. Before deciding, look at the total amount of your federal and state tax refunds or taxes owed and, if the student is your dependent, the student’s tax refunds or taxes owed. For example, if you are the student and you also claim the earned income credit, choosing to apply a scholarship or fellowship grant to nonqualified expenses by including the amount in your income may not benefit you if the decrease to your earned income credit as a result of including the scholarship or fellowship grant in income is more than the increase to your lifetime learning credit as a result of including this amount in income.
taxmap/pubs/p970-010.htm#en_us_publink1000178191

Expenses That Do Not Qualify(p27)

rule
Qualified education expenses do not include amounts paid for: This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
taxmap/pubs/p970-010.htm#en_us_publink1000178193

Sports, games, hobbies, and noncredit courses.(p27)

rule
Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify.
taxmap/pubs/p970-010.htm#en_us_publink1000178194

Comprehensive or bundled fees.(p27)

rule
Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. See Figuring the Credit, later, for more information about Form 1098-T.