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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- TIP 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 2022, Todd’s grandparent makes a pay- ment directly to an eligible educational institution for Todd‘s qualified education expenses. For purposes of claiming a lifetime learning credit, Todd is treated as re- ceiving the money from the grandparent and, in turn, pay- ing the qualified education expenses. Unless Todd is claimed as a dependent on someone else's 2022 tax return, only Todd can use the payment to claim a lifetime learning credit. If anyone, such as Todd's parents, claims Todd on their 2022 tax return, whoever claims Todd may be able to use the expenses to claim a lifetime learning credit. If anyone 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 2022 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 are married and file a joint tax return. For 2022, their MAGI is $75,000. Toni is attend- ing a local college (an eligible educational institution) to earn credits toward a degree in nursing. Toni already has a bachelor's degree in history and wants to become a nurse. In August 2022, Toni paid $5,000 of qualified edu- cation expenses for the fall 2022 semester. Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2022 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, 2023. 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 2022 for qualified education expenses. Chapter 3 Lifetime Learning Credit Page 29