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taxmap/pubs/p970-015.htm#TXMP4d3357d2 Figuring the Credit(p22)

The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. The maximum amount of lifetime learning credit you can claim for 2007 is $2,000 (20% × $10,000). However, that amount may be reduced based on your modified adjusted gross income (MAGI). See Effect of the Amount of Your Income on the Amount of Your Credit below.

taxmap/pubs/p970-015.htm#TXMP0034548a
Example.(p22)

Bruce and Toni Harper are married and file a joint tax return. For 2007, their MAGI is $75,000. Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. She already has a bachelor's degree in history and wants to become a nurse. In August 2007, Toni paid $6,000 of qualified education expenses for her Fall 2007 semester. Bruce and Toni can claim a $1,200 (20% × $6,000) lifetime learning credit on their 2007 joint tax return.

taxmap/pubs/p970-015.htm#TXMP7bcb40f6 Form 1098-T.(p22)

To help you figure your lifetime learning credit, you should receive Form 1098-T. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2008. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts in boxes 1 and 2 of Form 1098-T may be different than what you actually paid. When figuring the credit, use only the amounts you paid in 2007 for qualified education expenses.

In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time or were a graduate student.

The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.

taxmap/pubs/p970-015.htm#TXMP2bd06a78 Effect of the Amount of Your Income on the Amount of Your Credit(p22)

Effect of the Amount of Your Income on the Amount of Your Credit

The amount of your lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return). You cannot claim a lifetime learning credit if your MAGI is $57,000 or more ($114,000 or more if you file a joint return).

taxmap/pubs/p970-015.htm#TXMP7f987390 Modified adjusted gross income (MAGI).(p23)

For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

taxmap/pubs/p970-015.htm#TXMP523eb9c4 MAGI when using Form 1040A.(p23)

If you file Form 1040A, your MAGI is the AGI on line 22 of that form.

taxmap/pubs/p970-015.htm#TXMP5d24795e MAGI when using Form 1040.(p23)

If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:

1. Foreign earned income exclusion,
2. Foreign housing exclusion,
3. Exclusion of income for bona fide residents of American Samoa, and
4. Exclusion of income for bona fide residents of Puerto Rico.

You can use Worksheet 3-1 to figure your MAGI.

taxmap/pubs/p970-015.htm#w25221v0301

Worksheet 3-1.mMAGI for the Lifetime Learning Credit 1. Enter your adjusted gross income (Form 1040, line 38)   1.              2. Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2.                  3. Enter the amount of income from Puerto Rico that you are excluding   3.                  4. Enter the amount of income from American Samoa that you are excluding (Form 4563, line 15)   4.                  5. Add the amounts on lines 2, 3, and 4   5.              6. Add the amounts on lines 1 and 5. This is your modified adjusted gross income. Enter this amount on Form 8863, line 9   6.

taxmap/pubs/p970-015.htm#TXMP2191ac07 Phaseout.(p23)

If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 7–13 of Form 8863. The same method is shown in the following example.

taxmap/pubs/p970-015.htm#TXMP3dacc164
Example.(p23)

You are filing a joint return with a MAGI of $104,000. In 2007, you paid $6,600 of qualified education expenses.

You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). The result is a $1,320 (20% x $6,600) tentative credit.

Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. The numerator of the fraction is $114,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator is $20,000, the range of incomes for the phaseout ($94,000 to $114,000). The result is the amount of your phased out (reduced) lifetime learning credit ($660).

$1,320

×

$114,000 − $104,000 $20,000

=

$660

Previous Page:  Publication 970 - Tax Benefits for Education - Who Can Claim a Dependent's Expenses Next Page:  Publication 970 - Tax Benefits for Education - Claiming the Credit Use   to find additional occurrences of topic items.