The Lifetime Learning Credit has a maximum value of $2,000 per year, calculated as 20 percent of the first $10,000 of qualified expenses. Unlike the American Opportunity Credit, which can be taken only for the first four years of post-secondary education, the Lifetime Learning Credit can be used during any year. And the student does not have to be enrolled part-time or be in the process of earning a degree or educational credential. This makes the credit particularly valuable to graduate students.
The Lifetime Learning Credit is not refundable, meaning it can be used only to offset a tax liability. Any amount not used in the current year is lost. The costs of books and supplies are considered qualified expenses only if they are purchased directly from the eligible institution. This requirement differs from the American Opportunity Credit, which allows them to be purchased anywhere.
For 2013 tax returns, the credit phases out between MAGI of $53,000 and $63,000, for single taxpayers, and $107,000 and $127,000, for married taxpayers filing jointly. For 2014 returns, the credit phases out between MAGI of $54,000 and $64,000 for single taxpayers and $108,000 and $128,000 for married taxpayers filing jointly.
One important item to note is that the Lifetime Learning Credit is available up to a maximum of $2,000 per return. Even if there are three students included on one tax return and all have education expenses, the maximum credit remains $2,000. It is a per-return limitation, not a per-student limitation. In contrast, the American Opportunity Credit, including the refundable portion, is available on a per-student basis.