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Today, the budget of some colleges in the US is far more than that of some countries. Universities often require tuition fees and solution for this payment at the same time. The solution includes student loans, lifetime learning credit, and the American Opportunity Tax Credit, Forever GI Bill’s education benefits and so forth. There are some additional programs for financing students loans and some special programs for students. Lifetime learning credit (LLC) is another excellent opportunity to obtain some additional money over your tax.

For example, private student loan programs mainly designed for special faculties. For example, some banks would finance, other farming-related organizations would be interested in to borrow students who study in agricultural faculties. These private student loans come with credit, and the lowest interest rate is 2.9%. Students forgiveness programs are well-known as well. D. Trump declared one of the most recent applications in December 2018. It facilitated getting over student loans if the college shut down.

Being a taxpayer makes you eligible for the program, and you could get back 20% of your university expenses. In some cases, it is comparing with the American Opportunity Tax Credit. The LLC is more flexible than other opportunities. It is easy to be eligible for this credit and you can apply as long as you study. If you are 50 and want to take a programming course, you are welcome to claim for the LLC. You will come across detailed information about the credit on different subtopics of this passage.

The degree students often need financial aid. Student loans are allocating money, but they are a solution for the short term. In the long run, these loans become a real struggle. But lucky students can avoid paying the mortgage by many discharges, forgiveness programs. There are many options for paying your loan after graduating, as well. Here you can find information about any of the financing tools, get a general overview of how to apply and what to do in order to be selected as a winner of loan reducement.

Student tax credits and deductions. What are the differences?

If you are a student or a parent you should understand how student tax works and how to deal with taxes and deductions. According to the statistics, every student who graduated from undergraduate level leave the school with $37.000. Take into account the annual income of that student, you will immediately understand that he will struggle at least a few more years to pay back. In that case, tax credits and deductions come into play. Tax credits are directly related to your tax. It decreases the amount you should pay as a tax. While deductions reduce the amount of your taxable income. Indirectly, it reduces the amount of tax you are going to pay.

Several student tax credits can be applied. The best of them is the American Opportunity Tax Credit and lifetime learning credit. Parents and students mostly refer to student loan tax deduction. While tax credits cover tuition fees, books, computers, and other supplies, tax deductions only cover student loan repayments.

General Information and principles of the Lifetime learning credit

For every undergraduate student or his / her, parents can claim the program. The essence of the program is that if you are a taxpayer, you can earn money out of your loan payments. Let’s say you spend $10.000 to the uni in a year. Your money from the LLC will be $2000. But it does not cover living costs, books, and transportation. If you and your spouse are still students, just one of you can apply for the credit. If you and your child are students at the same time, and you are the primary responsible person to pay his university bills, totally $2000 can be earned, out of $10.000, regardless of how much is your total university expense.

And one taxpayer can be responsible only for a lifetime learning credit. You are not firmly required to study full-time. Vocational students, to name all degree education institutions including private, nonprofit and proprietary universities can apply for the credit. One more great news, if you graduated from the College, you still can be eligible. Just go through terms and conditions of the program and check whether your university is on the list. You only can apply once in a year, and the tax reduction is calculating based on your payments to the uni during a year.

In the regulation, it was mentioned that your modified adjusted growth income (MAGI) should be more than $57.000 and not exceed $67.000. If you and your wife fill the form MAGI range is $114.000 and $134.000. If your MAGI is less than $57.000 probably, you are eligible for different credit types which gives you the opportunity to earn more than that of lifetime learning credit. The program is not a deduction, but it directly reduces your taxes.

Once you received the additional $2000 to your bank account, the reimbursement is directly sent to the university you are studying. It facilitates the process and gives information to the university that you are selected as a nominee for the LLC. You should note that the credit will be added if you paid your yearly university fee.

Moreover, your expenses provide credit for the most recent year. Let’s say you paid $10.000 – the university tuition fee in 2017. If you forgot to apply the LLC in 2018, you could not use based on the money you paid in 2017.

To be qualified for the LLC

  • Students must be enrolled in an accredited college.
  • The enrollment status should match with the university degree. Let’s say you are a bachelor degree student. You can only apply based on bachelor degree expenses.
  • One taxpayer, one enrollment application.

Dual filers (wife – husband) should be careful filling the form. The credited money varies with your marital status.

  • Applicant needs to fill the form T-1098. T-1098 is a tuition statement and provided by the university. In case, your university does not give T- 1098 to you. You are not required to upload or attach it.
  • The deadline was 31 January 2019, for the lifetime learning credit. For being on the list of applicants, you should have filled the required sections in the application before that day. Often the deadline is beginnings of the next year because your payments to the uni need to be finished to take charge of proper credit forms.
  • The student should not necessarily apply for a four-year degree. The minimum required a length of study is one year, even if he takes just one lesson.
  • If you applied for the scholarship that covers expenses than a qualified degree, such as books, additional tools, it could be used to increase the tax student must pay. Indirectly, it influences the amount of LLC. For a given student, whose taxes are $9.000, a $1.000 additional expenses that covered by the award but is taxable at the same time, lifetime learning credit can be applied.

Who can claim for the credit?

If you or your spouse and/or your children study at the university and you are financing them, then you can apply for the LLC 2018. Usually, children are a dependent part, and families pay for them. In that case, both student himself and his parents can claim for the credit. IRS set up easy application rules, and almost everybody could apply for unless their income is not too much.  

Another case is that you should not ask for study financing from another body. Dual income as a study aid can cause you to be ineligible for this credit. You can not receive a deduction in the same year, as well. From the application form of the LLC, you can fill up the required sections and send your application to the IRS.

You can’t claim for the credit if you

  • Did claim for another person.
  • are paying for your children, you and your spouse who is the American citizen or carry the status which enables you to pay tax
  • Claimed for the American Opportunity Tax Credit.
  • Secured tax – free university assistantship. For example, if you found a supervisor or agreed with any organization for securing your university expenses.
  • Have received the Pell grant. Pell grant consists of tax – free part as well. You will only claim for the part which is conducted to the tax.
  • Receive a scholarship, award that is $10.000 more than your expenses. For instance, if your university fee is $20.000 your assistantship (award, scholarship, etc. ) needs to be lower than $10.000.

Some expenses are not qualified for the Lifetime Learning Credit

  1. Health expenses
  2. Room and board expenses
  3. Insurance
  4. Transportation
  5. Personal living and family expenses

Even though those costs are an internal part of the degree, they are excluded from LLC.

  1. Sport expenses.
  2. Activities related to the hobbies

Activities related to enhancing job abilities, career seeking talents can be qualified for the LLC.  

Particular cases to be considered as eligible for the LLC

  1. Additional equipment that is required by the university, but has not shown in the contract with the university. Let’s say if the agreement between you and the degree institution did not include additional facilities vital for the research, but absent in the university. ELISA is crucial for neuroscience research, but in the university, there is not one. If you paid for that tool, you could apply for the LLC.
  2. Books which bring money to the university. Unless according to the regulation of the LLC that the tax credit does not cover books, if the university earns money from his bookstores, every student who buys from this bookstore can include the amount to his expenses of the LLC.
  3. Money spent on student activity clubs. In addition to the university fee, expenses on clubs which, serve for personal and social enhancement of the student, are also qualified for the lifetime learning credit.
  4. If the third party (such as grandmother) paid instead of the student himself and that student is the only person can claim for the credit. The student’s parents are not able to declare the loan.
  5. If your dependent part is studying at the university, you are working, in that case, an increase in the taxable portion of your salary can be used for the LLC. It was considered that the tax you are paying to the university, is a part of the tuition fee. Thus it makes you eligible for the LLC.


If you explored a few websites, most surely you came across to the American Opportunity Tax credits. American opportunity tax credit helps you to gain 25% of your student expenses. If you did not borrow from the IRS, this percentage can rise up to 40%. This money is given to you as an addition to your bank account.

The highest amount of money you can get paid is $2500. It works like, all of the first $2000 and one-fourth of the next $2000. If you are lucky, the credit can overcome all of your tax so that you would have 0 tax. In this case, you still have the chance to be paid 40% of your money back, that costs $1000. It is a refund and will be sent you in addition to your bank account.

Being eligible for the American Opportunity Tax Credit (AOTC)

The chance of getting paid through AOTC is lower than LLC. The requirements are a little bit harsher. But the amount of refund money is higher compared to the Lifetime Learning Tax Credit (LLC). For LLC you can get $2000, and it is the maximum amount of money. With American Opportunity Tax Credit $2500 is the top refund, and if your all tax paid, $1000 would be paid to you.

Eligibility criterion:

  • You need to be a student at the time of application
  • The earliest time to apply is after half of the first education year at the university you are pursuing a degree
  • To be a bachelor or other accredited degree students
  • Should not use, distribute drug until the end of the tax credit payment. Any form of drug suspection would cause you to be eliminated as a candidate.
  • Do not receive lifetime learning credit. The function of both of the credits almost the same, thus one student can be applied only one. But if a parent pays for tuition fees of two of his children, then one credit for one student rule is maintaining with choosing for both of the programs.
  • The income you earned should be $80.000 for a single person.

What are the differences between LLC and American opportunity tax credit?

  1. Amount of the maximum refund. American Opportunity Tax Credit can bring you $500 more than the LLC.
  2. Refundability. If you don’t have to pay for IRS, still you can get 40% ($1000) of your credit via American Opportunity Tax Credit. But lifetime learning credit is not refundable.
  3. Limit of Modified Adjusted Growth Income for AOTC is $90.000 and $180.000 for single and married people, respectively. This values for LLC is $67.000 and $134.000 for single and married people respectively.
  4. American Opportunity Tax Credit demands to be degree student currently. For LLC you can apply after graduation and even for the additional courses such as the development of you in your career.
  5. Students can receive the American Opportunity Tax Credit for up to four years. Those who selected as Hope credit candidate can be suitable as well. Unlimited years of tax is applicable for Lifetime Learning Credit credible students.
  6. Only students pursuing an academic degree (bachelor, master or Ph.D.) can apply for the American Opportunity Tax Credit, whilst LLC does not assess students regarding their study degrees.
  7. While one course is enough for the LLC, AOTC demands half of a year in the accredited university degree.
  8. The LLC does not apply any drug restriction, however, the American Opportunity Tax Credit demands no history with drugs.
  9. AOTC cover course materials which are not covering by the LLC.

Claiming the American Opportunity Tax Credit

The hard copies of sheets you provided must be maintained. Many problems occurred related to this issue so far. Sometimes the second view to your documents reveals that you were not qualified. Having additional copies will help you to avoid paying back the money financed by the AOTC.

The TIN is a demonstration of you are a taxpayer. The expiration date of this card should not be longer than the last day for the credit.  

Similarities between two tax credits

  • You do not sign up separately if you are married
  • You either claim for yourself (as a student) or for your dependent (as a parent). Not for both
  • You either should be a resident of the US or have a resident alien (in compliance with Publication 519) which makes you responsible for tax, charging.
  • Claiming for the credit must be by you / your spouse / your children as a dependent part. Money to the university should be paid by you / your spouse / third party to be eligible for the credits.
  • Academic payments need to be made in 2018 or until March of 2019.
  • To claim the credit, you need to fill form 8863.

*the data presented based on the statistics provided by the earned internal tax credit.

Student loan deductions, general overview

The amount of money that you can bring back while paying your loan is $2500. This amount comes to your taxable income and indirectly reduces the tax. The investment has taken for the education profits needs to be paid either you and your spouse or dependent part. To be eligible, your MAGI should not exceed $65.000. $80.000 is your MAGI to be selected as a nominee for the Credit.

Student Loan deduction expense covers:


  1. Tuition fees
  2. Additional facilities (books, and equipment)
  3. Transportation
  4. Room and boards.

If the room costs included inside the attendance costs, only in this case your rooms expenses are allowed taking into account as student loan interest deduction. Although the fixed amount of the deduction is $2500, you can claim for the $4000 decrease to your tax. For $4000 deduction to your income, you should pay your tuition fee with the loan.

What makes you ineligible for the student loan deduction?

  • Filling your marital status separately, although you are married
  • To apply for another tax return. It does not matter, you are selected applicant or not, having in a position to ask for other tax return makes you ineligible.
  • Higher MAGI than $80.000. This amount gives the notion that you are in a position to pay for your university degree.
  • Your residence status is not applicable for tax. All three programs are for taxpayers. By paying tax, you already send money to the budget of the state indirectly, through the university. Some amount of this loan repayment, whether it is $2000 or $2500 depending on the tax refund, is giving back to you.
  • You should claim neither AOTC or Lifetime Learning Credit. Those three programs designed to aid students in their tuition fee and taxes. Selected for any program gives you a status that the government already finances you.