Why can't I claim the lifetime learning credit?

[robclevegas]

Married filed jointly. Our AGI was self employment income of just under $20,000 and I was in college full time.  With the deductions we technically didn't have a tax liability, however we still owed $1263 in taxes based on the self-employment income and we hadn't made quarterly tax payments as this is the 1st year either of us has worked without an employer.  After grants & the portion of expenses the GI-Bill covered, I had qualified education expenses (tuition) of $1,600.  Why am I not allowed to utilize the lifetime learning credit for the portion of the taxes we still had to pay?

[KrisD · Accepted solution]

The education credits are applied before self-employment tax, so if the tax you owe is for self-employment, line 57, the Lifetime Learning credit will not offset that tax. The only credits that can offset the self-employment tax are the refundable credits, including the Earned Income Credit, the American Opportunity Credit, and the Additional Child Tax Credit.