Accessing formal education is key to achieving personal and professional growth. Unfortunately, tuition fees are so high in America that many people from low-income households can’t afford the cost.
The Lifetime Learning Credit (LLC) is a government-funded tax benefit which aims to ease the financial burden of education. Whether you’re a working-class professional looking to upskill, pursuing a passion, or a parent looking to support your children’s education, you should learn about the LLC.
This article explores the key aspects of this tax benefit, including qualifying expenses, eligibility criteria, and how to claim the credit on your tax return.
What Is the Lifetime Learning Credit?
The Lifetime Learning Credit (LLC) is a special tax benefit that enables eligible taxpayers to offset educational and tuition expenses while pursuing higher learning. Provided by the US Department of the Treasury, LLC allows qualifying recipients to claim a percentage of their educational expenses as a credit against their federal income tax liability.
The Lifetime Learning Credit 2023 is non-refundable. This means that it reduces the amount of federal income taxes owed. However, it will not be refunded if you do not owe any federal income taxes.
Benefits of the LLC
The benefits of the LLC include the following:
- More flexibility. The LLC provides more flexibility on eligible educational programs than other tax benefits. You can claim the LLC whether you’re in a graduate or post-graduate program.
- Tax savings. The major benefit of the LLC is that you can use educational expenses as a credit against your federal income tax liability. This eventually reduces your taxes owed.
- Zero limits on the number of years. There is no limit on the number of years you can claim the tax credit, making it a suitable option for individuals pursuing a lengthy educational degree.
- Wide range of educational options. Another benefit of the LLC is that it covers various educational programs beyond graduate and post-graduate programs. The LLC can claim tax benefits on personal enrichment courses and job-related skills training if offered by an eligible institution..
LLC vs AOTC
The Lifetime Learning Credit and the American Opportunity Tax Credit (AOTC) are tax benefits the IRS provides to qualifying students. However, both of them have key differences which include:
- Duration. The AOTC can be claimed for up to 4 years of post-secondary education. However, there’s no limit on how many years you can claim the LLC. This makes the latter option more appealing to people who are pursuing education beyond 4 years, such as post-graduate and professional programs.
- Nature of the tax credit. The AOTC is partially refundable. If the tax credit exceeds the tax liability, you may be eligible for up to $1,000 in tax refunds. However, the LLC is non-refundable – which means it only reduces the amount of federal income taxes owed and will not be refunded.
- Qualified expenses. While both tax benefits offset educational expenses, the AOTC also includes course materials and supplies expenses. The LLC does not have these provisions.
- Maximum credit amount. While the AOTC offers a maximum credit of up to $2,500 per eligible student, the LLC offers a max credit of up to $2,000 per tax return.
It is essential to note that both the LLC and AOTC have different eligibility requirements, income limits, and other criteria that taxpayers must meet. You can read about the documentation needed and how to apply for the AOTC here.
Who Is Eligible for the Lifetime Learning Credit?
To become eligible for the Lifetime Learning Credit 2023, you should be enrolled in an approved educational institution. You can find the list of eligible educational institutions here. You also need to meet the following requirements:
- Be enrolled or attending courses at an eligible educational institution
- Have paid the educational expenses for a student at the eligible institution
- Be taking a course or pursuing a degree to get or improve a skills
- Be enrolled for at least one academic period beginning in the tax year
You can also use this LLC eligibility calculator to see if you qualify.
How To Apply for the Lifetime Learning Credit
To claim the LLC, you must:
- Receive Form 1098-T (Tuition Statement) from your eligible educational institution
- Complete Form 8863 (Education Credit) and attach the forms to your Form 1040 or Form 1040A
You can also contact 800-829-1040 or the Lifetime Learning Credit resource page for more information.
Document Needed To Apply for LLC
You will need the following documents when applying for the LLC:
- Enrolment and attendance records
- Educational receipts and invoices for all expenses
- Taxpayer Identification Number (TIN)
- Proof of disability-related accommodation or documentation of scholarship and grants if any
Processing Time for Receiving LLC
The processing time for receiving the LLC after application can vary depending on some factors, including the completeness of your tax return, the volume of tax returns being processed, and your method of filing the tax returns.
If you file your taxes electronically, you can expect to see your LLC within a couple of weeks, depending on the workload of the IRS. However, filing a paper tax could take several weeks, as they will need to be manually processed and verified by the IRS.
How To Check the Status of Your Application
You can check the status of your LLC application by clicking the “Where’s My Refund?” resource on the IRS website. You can also call the IRS hotline at 1-800-829-1954.
What If Your Application Gets Declined?
You will receive a denial notice from the IRS if your application is declined. The reason for the disapproval will be disclosed in the notice. It could be missing or incorrect information on your tax return. The letter will also include how you can rectify the situation.
Investing in Your Future
The Lifetime Learning Credit (LLC) is an essential tax credit that can help ease the educational expenses burden for eligible taxpayers. This makes it valuable for Americans looking to acquire new skills, improve their career prospects, and pursue higher education.
Now you know how you can claim the LLC on your federal tax return if you want to offset your educational expenses.
