The Lifetime Learning Credit is a tax credit available to individuals who file a tax return and owe taxes. This means the amount of the credit is subtracted from the taxes your family owes, rather reducing taxable income like a tax deduction does. You cannot get a refund for the Lifetime Learning credit if your family doesn't pay taxes. If your family owes less in taxes than the maximum amount of the Lifetime Learning tax credit for which your family is eligible, you can only take the credit for the amount you owe in taxes. As of tax year 2008 your family may claim a tax credit of up to $2,000 per tax year for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of tax years. The amount of the Lifetime Learning tax credit is 20% of the first $10,000 of qualified educational expenses paid for all eligible students. Therefore, the maximum amount of a Lifetime Learning tax credit is $2,000. The Lifetime Learning credit is available for all years of postsecondary education and for courses to acquire or improve job skills. Unlike the Hope credit (which is only available for two years) the Lifetime credit is available for an unlimited number of years.

The actual amount of the credit depends on your family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. This credit is family-based (up to $2,000 per tax return) rather than based on the number of dependents in your family as with the Hope credit.

The Lifetime Learning Credit is available for qualified tuition and related expenses i.e., tuition and fees, but not room and board or books incurred at any time during the tax year. It includes expenses towards any course of instruction at a qualified education institution to acquire or improve an individual's job skills. The Lifetime Learning Credit is available for both undergraduate and graduate-level course work, as well as course work that improve job skills.

With higher education costs climbing steadily upward nearly 8% per year many families are particularly concerned about accumulating enough money to put their children through college. College cost projections are continually increasing. Based on the latest averages from The College Board and recent average annual college cost increases, a child who entered kindergarten in 1995 will face four-year college costs of nearly $100,000 if he or she chooses to attend a public college in 2008. For a private college, costs will probably be double that.

The Lifetime Learning Credit is available for qualified tuition and related expenses (i.e., tuition and fees, but not room and board or books) incurred at any time during the tax year, and equals 20% of up to $10,000 of college expenses. For purposes of the Lifetime Learning Credit, qualified education expenses include expenses with respect to any course of instruction at a qualified education institution to acquire or improve an individual's job skills. Thus, the Lifetime Learning Credit is available for both undergraduate and graduate-level course work, as well as course work that improves job skills. With certain exceptions, expenses paid with tax-exempt education assistance (generally, expenses paid with grants or scholarships) do not qualify for the Lifetime Learning Credit. However, qualified expenses paid with loan proceeds are eligible for the Lifetime Learning Credit.

You cannot claim the Lifetime Learning Credit on your tax return if you are subject to the phase out because of the amount of your income. The Lifetime Learning Credit is phased out as modified AGI raises from $87,000 to $107,000 for joint tax return filers ($43,000 to $53,000 for single tax return filers).
In the case of a dependent, if the Lifetime Learning Credit is claimed by a taxpayer other than the student (e.g., a parent), the dependent student may not claim the Lifetime Learning Credit, and the taxpayer is treated as paying all eligible expenses for the tax year for Lifetime Learning Credit purposes. The maximum annual Lifetime Learning Credit is $2,000.
As an alternative to the Lifetime Learning Credit, eligible taxpayers may elect to exclude from income amounts withdrawn from Education IRAs that are used to pay the taxpayer's, spouse's, or dependent's qualified education expenses. The income exclusion is not available in any tax year that a Lifetime Learning Credit is elected with respect to a student.

Figure you Lifetime Learning Credit on Form 8863.