Introduction

The lifetime learning credit may be available to you if you pay higher education costs.

Table 2-1 summarizes the differences between the lifetime learning and Hope credits. If you are eligible to claim both credits based on the higher education expenses of one student, it will generally be to your benefit to claim the Hope credit.

The Hope credit is discussed in chapter 1.

This chapter explains:

• Who can claim the lifetime learning credit,
• What expenses qualify for the credit,
• How the credit is figured,
• How the credit is claimed, and
• When the credit must be repaid.

What is the tax benefit of the lifetime learning credit? You may be able to claim a lifetime learning credit of up to $1,000 for qualified tuition and related expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years for which 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.

Credit more than tax. Your lifetime learning credit cannot be more than the amount of your tax. Therefore, you cannot get a refund for any part of the credit that is more than your tax.

Can you claim both education tax credits this year? 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 2001 tax return, you cannot, for that same child, also claim the Hope credit for 2001.

Lifetime learning credit after Hope credit. You can claim the Hope credit for the first 2 years of an eligible student's postsecondary education and claim the lifetime learning credit for that same student in later years.

Tax credits for more than one student. If you pay qualified expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means that, for example, you can claim the Hope credit for one student and the lifetime learning credit for another student in the same year.

Comparison of Education Credits

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