Lifetime Learning Calculation

[jmathieu]

Why is lifetime learning credit so low - only a $79 credit, but qualified tuition was $24,420 (less $5,000 scholarship) plus $125 in qualified education costs.  Thought it would be 20% of the first $1000 of qualified tuition and related expenses, but it is much less.

[TaxGuyBill]

Look at your Form 1040.  What is on Line 47?  What is on Line 56?

[jmathieu]

Using Form 1040A. Line 28 and Line 36 are both $79.00.  Should I be looking at different lines?  And, Total Qualified Expenses (Form 8863, Part III, Box 31) is $19,576. Thank you for your help!

[TaxGuyBill · Accepted solution]

The Lifetime Learning Credit is a nonrefundable credit.  That means it is limited to the amount of income tax that is on your tax return.

Line 28 of your Form 1040A shows you only have $79 of income tax, so that is the maximum amount of credit that you can receive.  If your income tax had been higher, the Lifetime Learning Credit would have also been higher to offset that tax (up to $2000 of credit).

[jmathieu]

Thank you!