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use the expenses to claim a lifetime learning credit. If any- one else claims Todd, Todd can't claim a lifetime learning credit. Tuition reduction. When an eligible educational institu- tion provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a pay- ment of that amount and, in turn, paying it to the educa- tional institution on behalf of the student. For more infor- mation on tuition reductions, see Qualified Tuition Reduction in chapter 1. Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. The maximum amount of lifetime learning credit you can claim for 2021 is $2,000 (20% × $10,000). However, that amount may be reduced based on your MAGI. See Effect of the Amount of Your Income on the Amount of Your Credit, later. Example. Bruce and Toni Harper are married and file a joint tax return. For 2021, their MAGI is $75,000. Toni is attending a local college (an eligible educational institu- tion) to earn credits toward a degree in nursing. She al- ready has a bachelor's degree in history and wants to be- come a nurse. In August 2021, Toni paid $5,000 of qualified education expenses for her fall 2021 semester. Bruce and Toni can claim a $1,000 (20% × $5,000) life- time learning credit on their 2021 joint tax return. Form 1098-T. To help you figure your lifetime learning credit, the student may receive Form 1098-T. Generally, an eligible educational institution (such as a college or uni- versity) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2022. An institu- tion will report payments received (box 1) for qualified ed- ucation expenses. However, the amount on Form 1098-T might be different from what you paid. When figuring the credit, use only the amounts you paid or are deemed to have paid in 2021 for qualified education expenses. In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimburse- ments or refunds, and whether the student was enrolled at least half-time or was a graduate student. The eligible educational institution may ask for a com- pleted Form W-9S or similar statement to obtain the stu- dent's name, address, and taxpayer identification number. Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) 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 a lifetime learning credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint re- turn). Modified adjusted gross income (MAGI). For most taxpayers, MAGI is adjusted gross income (AGI) as fig- ured on their federal income tax return. MAGI when using Form 1040 or 1040-SR. If you file Form 1040 or 1040-SR, your MAGI is the AGI on line 11 of that form, modified by adding back any: 1. Foreign earned income exclusion, 2. Foreign housing exclusion, 3. Foreign housing deduction, 4. Exclusion of income by bona fide residents of Ameri- can Samoa, and 5. Exclusion of income by bona fide residents of Puerto Rico. You can use Worksheet 3-1 to figure your MAGI. MAGI for the Lifetime Learning Credit 1. Enter your adjusted gross income (Form 1040 or 1040-SR, line 11) . . . . . . 1. 2. Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45) . . . . . . . . . . 2. 3. Enter your foreign housing deduction (Form 2555, line 50) . . . . . . . . . . . . . . . 3. 4. Enter the amount of income from Puerto Rico you’re excluding . . . . . . . . 4. 5. Enter the amount of income from American Samoa you’re excluding (Form 4563, line 15) . . . . . . . . . . . . . . . 5. 6. Add the amounts on lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . . 6. 7. Add the amounts on lines 1 and 6. This is your modified adjusted gross income. Enter this amount on Form 8863, line 14 . . . . . . . . . . . . . . . 7. Phaseout. If your MAGI is within the range of incomes where the credit must be reduced, you will figure your re- duced credit using lines 10–18 of Form 8863. The same method is shown in the following example. Example. You are filing a joint return with a MAGI of $161,000. In 2021, you paid $6,600 of qualified education expenses. You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid Worksheet 3-1. Page 30 Chapter 3 Lifetime Learning Credit