Graduate Student: Qualify for Lifetime Learning Credit (LLC) but Unable to Claim

[MikeGTaxes]

I have seen a few different posts on this topic that usually determine the poster has income that is too low or too high to qualify. I do not believe this applies to my situation.

A few key pieces of information:

• I am filing Single.
• I am a graduate student enrolled at least half time
• My MAGI is $12,565 (well below the $80,000 phase-out start) after adjusting for small business ta.
• I have $24,607 in net qualified education expenses (significantly more than the $10,000 needed to calculate the maximum potential credit).
• I am not claiming the American Opportunity Tax Credit.
• I cannot be claimed as a dependent.
• I have a federal tax liability of $746 to offset.

Based on all of this I believe I should be able to the LLC to offset my $746 federal tax liability.

[MinhT1]

Yes, you are correct.

You should be eligible for the LLC, with a maximum tax credit of $2,000. This would bring your tax liability to 0. This credit is non refundable.

[MikeGTaxes]

Thank you, is there a reason this would not be reflected in TurboTax? I have tried deleting and re-entering my educational expense info from the 1098T form in addition to reviewing my taxable income information multiple times. No matter what I do, TurboTax keeps telling me that I am unable to claim the lifetime learning credit for this year.

[Hal_Al · Accepted solution]

The LLC can not be used to offset  Self employment tax, only income tax. 

With  $12,565 of earned income, your standard deduction will reduce your taxable income (and your income tax) to $0. 

The fact that you mention adjusting for small business tax, indicates that you have self employment income. 

Note, that the self employment tax on line 23 of form 1040 comes after the Schedule 3 credits (on line 20) are applied.  Self employment Tax is how the self employed pay their social security and Medicare tax. 

[MikeGTaxes]

Ahh that would make much more sense. I think that must be it, thank you!

Looks like Uncle Sam wins again this time.