What factors would cause me to receive a Lifetime Learning Credit less than $2000? I'm surprised I'm getting less back on my refund than I did last year when my circumstances have hardly changed.

[hussenn]

i have the same question, i am a grad student, loan amount/educational expense 12K, income 24k, i was expecting 2K life time credit but it is only 1300, I need help.

[ChristinaS · Accepted solution]

To get a Lifetime Learning Credit of $2000:

• Your education expenses (less scholarship) must be $10,000 or more. The credit is 20% of net expenses, up to $10k
• If your expenses are at least $10k, your tax liability after other credits must also be at least $2000. If your tax liability is only $1500 (as an example), you only need $1500.
• Assuming the 2 points above are met, your income also must be under $55,000 (or $131,000 on a joint return). The credit is phased out between $55k and $65k.

What's on your 1098-T and what's your income/ situation?(kids, etc)

[simonep]

I have the same question. I Received the credit on my '20 tax return for the full amount and now for my '21 return I'm getting considerably less (less than half) and I am wondering what caused that? Nothing in my life has changed(no  kids or major purchases). My tuition was higher even because I was enrolled for all quarters. Or does my tuition have to be a certain amount above my scholarships and grants?

[AmyC]

Yes, your tuition minus your grants and scholarships equals the part that you are allowed to count towards the credit. The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

See also:

• Lifetime Learning Credit
• Compare the LLC and AOTC

@simonep

[mbright]

I'm confused about my current calculated LLC, only $71. My education expenses were $6,663, so I know I won't get the full $2,000 credit because my expenses were less than $10,000. I thought I would get 20% of $6,663, or something close to it.  My income is low, less than $15,000. I'm single, no kids. I feel like I must be entering something wrong or I'm misunderstanding the LLC.

[Vanessa A]

The Lifetime Learning Credit is a nonrefundable credit.  This means, the credit is limited to the amount of  tax liability that you have.  If you had $15,000 in income, then you subtract your standard deduction of $13,850, you would have $1,150 in taxable income which would be about $71 in tax liability.  The Lifetime Learning credit, without the limit for $6,663 would have been $1,333, but you were only able to get $71 due to your tax liability being $71. 

[mbright]

Thank you for clarifying @Vanessa A . Can you elaborate on how you calculated $71 in tax liability from the $1,150 in taxable income?

[KrisD15]

The tax return determines what you owe in tax or what you get back as a refund. 

First you enter all your income, you say that was 15,000 in your case. 

Next that income is adjusted (things are subtracted out). There are various things that can adjust the income, but let's just use the Standard Deduction which most taxpayers take. 13,850 is the amount of the Standard Deduction for a taxpayer filing Single. Subtract 13,850 from the 15,000 total income leaves 1,150 as taxable income. If you are in the 10% tax bracket, that would be 115 tax, but you must have other adjustments that brings the tax down to 71, perhaps interest on a student loan. Look at line 15 on your 1040 for your taxable income and line 16 for your tax liability. Look at Schedule 1 for adjustments. 

As stated earlier. The Lifetime Learning Credit is Non-refundable, so once that tax is brought down to zero (line 22) the Lifetime Learning Credit ends. 

From there, additional tax MIGHT be added which the Lifetime Learning Credit cannot offset, such as self-Employment Tax. The final tax liability is on line 24. 

After that, your payments (withholding and estimated payments) as well as REFUDABLE credits are factored in for the final tax bill or refund. 

Since you said the Lifetime Learning Credit was 71, it can be assumed that was your liability (or close to it) on line 16.