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Valor Tax Relief Team
Professional Tax Planning & Resolution Specialists
Key Takeaways
- The Lifetime Learning Credit (LLC) can reduce your federal tax by up to $2,000 per tax return.
- The credit equals 20% of the first $10,000 in qualified education expenses—no cap on how many years you can claim it.
- Unlike the AOTC, the LLC applies to graduate programs, professional development, and non-degree courses.
- Income phase-outs apply: $80,000–$90,000 MAGI for single filers, $160,000–$180,000 for married filing jointly.
- The LLC is non-refundable—it can only reduce tax to zero; excess credit is not refunded.
- Claim the LLC on Form 8863, using information from Form 1098-T issued by the school.
Higher education is one of the most significant investments you can make. Rising tuition costs can strain budgets, but the IRS offers several education tax credits to help. The Lifetime Learning Credit (LLC) is a non-refundable credit that lets eligible taxpayers cut their federal tax by up to $2,000 per return. Unlike the American Opportunity Tax Credit (AOTC), which targets undergraduates, the LLC supports a broader range of learning—graduate studies, professional development, and non-degree programs. Understanding how the LLC works, who qualifies, and how to claim it can help you maximize your education tax benefits.
As of 2026, the Lifetime Learning Credit remains a stable education tax benefit with no lifetime claim limit. Whether you are finishing a master’s degree, earning a professional certificate, or taking courses to switch careers, the LLC can reduce your tax bill while you invest in your future.
What Is the Lifetime Learning Credit?
The Lifetime Learning Credit is a non-refundable tax credit that helps offset the cost of higher education. Eligible taxpayers can reduce their federal income tax by up to $2,000 per tax return. The credit is calculated as 20% of the first $10,000 in qualifying education expenses, so anyone who spends $10,000 or more on eligible costs can claim the full credit.
Unlike the AOTC, which is limited to four years per student, the LLC has no lifetime cap. That makes it especially useful for graduate students, working professionals pursuing additional training, and lifelong learners taking courses to upgrade skills or change careers.
How Much Is the Lifetime Learning Credit Worth?
The maximum Lifetime Learning Credit is $2,000 per tax return. It is based on 20% of the first $10,000 in qualified education expenses. Even if multiple students in a household qualify, the total credit stays capped at $2,000.
| Qualified expenses | Credit rate | Credit amount |
|---|---|---|
| $5,000 | 20% | $1,000 |
| $10,000 or more | 20% | $2,000 (max) |
Non-refundable credit. The LLC can only reduce your income tax liability to zero. Any excess credit is not refunded. For example, if you owe $1,500 in taxes but qualify for the full $2,000 credit, the credit wipes out your $1,500 tax bill. The remaining $500 is not paid back to you.
Who Qualifies for the Lifetime Learning Credit?
Eligibility depends on your income, the type of school, and the coursework you pursue. You can claim the credit for yourself, your spouse, or a dependent—as long as you paid the qualifying expenses and meet the income limits.
Eligible Taxpayers
You must have paid qualifying education expenses for yourself, your spouse, or a dependent on your return. Unlike the AOTC, the LLC does not require the student to be pursuing a degree—any eligible course at an accredited institution qualifies.
Eligible Institutions
Only institutions that hold accreditation and participate in federal student aid programs qualify. Accredited four-year colleges, community colleges, trade schools, and many professional training programs typically meet this bar. Confirm your school’s status by checking the Federal School Code List maintained by the U.S. Department of Education.
Income Limits for Tax Year 2026 (Filed in 2027)
Single filers see the credit phase out as MAGI rises from $80,000 to $90,000; married couples filing jointly phase out between $160,000 and $180,000. These dollar amounts have stayed fixed since 2020, as the IRS no longer adjusts the LLC income thresholds for inflation.
| Filing status | Phase-out starts (MAGI) | Phase-out complete (MAGI) |
|---|---|---|
| Single | $80,000 | $90,000 |
| Married filing jointly | $160,000 | $180,000 |
What Expenses Qualify for the Lifetime Learning Credit?
Knowing which expenses count is essential for maximizing the credit and avoiding errors. The IRS is strict about what qualifies—claiming ineligible amounts can trigger an audit or require you to repay the credit.
Qualified Expenses
Eligible costs include tuition and mandatory enrollment fees required for attendance. Some course-related items—books, supplies, and equipment—may qualify if purchased directly from the school as a condition of enrollment.
Example: A student in a graduate program that requires a specific software package for coursework can include that software cost if bought from the university. If the same software is bought from a third-party retailer, it does not qualify.
Non-Qualified Expenses
Room and board, transportation, medical expenses, and personal expenses do not qualify. Expenses covered by employer tuition assistance, scholarships, or other tax-free education benefits cannot be used to calculate the credit.
How to Claim the Lifetime Learning Credit
Following the correct steps ensures you receive the full benefit without errors or delays.
Required Tax Forms
Complete IRS Form 8863, Education Credits, and attach it to your Form 1040. Form 8863 calculates the allowable credit based on qualified expenses and income phase-out limits.
Form 1098-T
Schools issue Form 1098-T, Tuition Statement, to students who paid eligible tuition and fees. This form shows total qualified expenses paid during the tax year. Review it carefully and use only eligible amounts in your credit calculation.
Example: If Form 1098-T shows $12,000 in tuition paid, but $3,000 was covered by a scholarship, only the remaining $9,000 can be used to calculate the Lifetime Learning Credit. Always subtract any tax-free aid from the amounts on Form 1098-T before computing your credit.
LLC vs. Other Education Tax Credits
Comparing the Lifetime Learning Credit with other education credits helps you choose the best option for your situation.
| Feature | Lifetime Learning Credit | American Opportunity Credit |
|---|---|---|
| Max credit | $2,000 per return | $2,500 per student |
| Refundable? | No | Yes (up to $1,000) |
| Year limit | Unlimited | 4 years per student |
| Who qualifies | Undergrad, grad, non-degree | Undergrad only |
A taxpayer pursuing a second bachelor's degree or taking continuing education for professional certification would typically use the LLC. An undergraduate in their first four years of college might benefit more from the AOTC. Run the numbers for both credits before filing—income, expenses, and refundability can make one option clearly better for your situation.
You cannot claim both the LLC and AOTC for the same student in the same tax year. If a household has multiple students, one may qualify for the AOTC and another for the LLC. Compare potential benefits to see which credit gives you the most tax savings.
Common Mistakes to Avoid
Avoiding common filing errors when claiming the Lifetime Learning Credit helps prevent IRS issues and ensures you receive the full credit you deserve.
Claiming Both AOTC and LLC for the Same Student
The IRS does not allow both credits for the same student in the same tax year. Review eligibility and choose the credit that provides the higher benefit.
Overlooking Income Limits
Many taxpayers assume they qualify without checking MAGI. If income exceeds the phase-out range, the credit may be reduced or eliminated. Calculate MAGI and consider tax planning strategies to stay within limits.
Failing to Use Form 8863
Some taxpayers claim the credit on Form 1040 without completing Form 8863. That can cause processing delays or IRS disallowance. Proper documentation and form submission are essential.
What's New for 2026
For 2026, the LLC keeps the same income phase-out ranges as 2025: single filers between $80,000 and $90,000 MAGI, and married couples filing jointly between $160,000 and $180,000. The cap remains $2,000 per return, with no inflation indexing since 2020. Eligibility and structure stay the same, and the One Big Beautiful Bill Act does not alter how the Lifetime Learning Credit works.
Tax Help for Students
The LLC helps offset the cost of continuing education, with annual tax savings of up to $2,000. Because it has no year limit and covers a wide range of programs, it works well for grad students, working professionals upgrading skills, and anyone pursuing non-degree courses. Getting the eligibility rules, qualified expenses, and filing steps right can help you capture the full benefit and lower your tax bill. A tax professional can help you tailor education-related tax strategies to your situation.
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