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condition for receiving the scholarship or fellowship grant. Earned income doesn't include that part of the compensa- tion for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtract- ing the deduction for one-half of self-employment tax). However, if capital isn't an income-producing factor and your personal services produced the business income, the 30% limit doesn't apply. Support. Your support includes food, shelter, clothing, medical and dental care, education, and the like. Gener- ally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. However, a scholarship received by you isn't considered support if you are a full-time student. See Pub. 501 for details. Full-time student. You are a full-time student for 2021 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible edu- cational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040-SR. Enter the nonrefundable part of the credit on Schedule 3 (Form 1040), line 3. Enter the refundable part of the credit on Form 1040 or 1040-SR, line 29. A filled-in Form 8863 is shown at the end of this publication. Note. In Appendix A at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 3. Lifetime Learning Credit What’s New Modified adjusted gross income (MAGI) limits. For 2021, the amount of your lifetime learning credit is gradu- ally reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You can't claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint re- turn). For more information, see Figuring the Credit. Reminder Form 1098-T requirement. To be eligible to claim the lifetime learning credit, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition State- ment, from an eligible educational institution, whether do- mestic or foreign. However, you may claim the credit if the student doesn't receive a Form 1098-T because the student's ed- ucational institution isn't required to furnish a Form 1098-T to the student under existing rules (for example, if the stu- dent is a qualified nonresident alien, has qualified educa- tion expenses paid entirely with scholarships, has quali- fied education expenses paid under a formal billing arrangement, or is enrolled in courses for which no aca- demic credit is awarded). If a student's educational institu- tion isn't required to provide a Form 1098-T to the student, you may claim the credit without a Form 1098-T if you oth- erwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and rela- ted expenses. You may also claim the credit if the student attended an eligible educational institution required to furnish Form 1098-T but the student doesn't receive Form 1098-T be- fore you file your tax return (for example, if the institution is otherwise required to furnish the Form 1098-T and doesn't furnish it or refuses to do so) and you take the following required steps: After January 31, 2022, but before you file your 2021 tax return, you or the student must request that the educational institution furnish a Form 1098-T. You must fully cooperate with the educational institution's ef- forts to gather the information needed to furnish the Form 1098-T. You must also otherwise qualify for the benefit, be Page 22 Chapter 3 Lifetime Learning Credit