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tax refunds or taxes owed. For example, if you are the stu- dent and you also claim the earned income credit, choos- ing to apply a scholarship or fellowship grant to nonquali- fied expenses by including the amount in your income may not benefit you if the decrease to your earned income credit as a result of including the scholarship or fellowship grant in income is more than the increase to your lifetime learning credit as a result of including this amount in in- come. Expenses That Don't Qualify Qualified education expenses don't include amounts paid for: • Insurance; • Medical expenses (including student health fees); • Room and board; • Transportation; or • Similar personal, living, or family expenses. This is true even if the amount must be paid to the institu- tion as a condition of enrollment or attendance. Sports, games, hobbies, and noncredit courses. Qualified education expenses generally don't include ex- penses that relate to any course of instruction or other ed- ucation that involves sports, games, or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. Comprehensive or bundled fees. Some eligible educa- tional institutions combine all of their fees for an academic period into one amount. If you don't receive or don't have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is generally required to make this allocation and provide you with the amount you paid for qualified education expenses on Form 1098-T. See Figuring the Credit, later, for more information about Form 1098-T. Who Is an Eligible Student? For purposes of the lifetime learning credit, an eligible stu- dent is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Quali- fied Education Expenses, earlier). Who Can Claim a Dependent's Expenses? If there are qualified education expenses for your depend- ent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. For you to claim a lifetime learning credit for your de- pendent's expenses, you must also claim your dependent on your tax return. You do this by listing your dependent's name and other required information on Form 1040 or 1040-SR. IF you... THEN only... claim on your tax return a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. The dependent can't claim the credit. don't claim on your tax return a dependent who is an eligible student (even if entitled to claim the dependent) the dependent can claim the lifetime learning credit. You can't claim the credit based on this dependent's expenses. Expenses paid by dependent. If you claim on your tax return an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Include these expenses when figuring the amount of your lifetime learning credit. Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are trea- ted as paid by your dependent. Expenses paid by you. If you claim a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. If neither you nor anyone else claims the depend- ent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. Expenses paid by others. Someone other than you, your spouse, or your dependent (such as a relative or for- mer spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's quali- fied education expenses. In this case, the student is trea- ted as receiving the payment from the other person and, in turn, paying the institution. If you claim the student as a dependent on your tax return, you are considered to have paid the expenses. Example. In 2021, Ms. Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. For purposes of claiming a lifetime learning credit, Todd is treated as re- ceiving the money from his grandmother and, in turn, pay- ing his qualified education expenses himself. Unless Todd is claimed as a dependent on someone else's 2021 tax return, only Todd can use the payment to claim a lifetime learning credit. If anyone, such as Todd's parents, claims Todd on his or her 2021 tax return, whoever claims him may be able to TIP Chapter 3 Lifetime Learning Credit Page 29