How is the lifetime learning credit calculated?

The lifetime learning credit is calculated based on a percentage of qualifying educational expenses incurred by an eligible taxpayer. Specifically, it allows taxpayers to claim a credit of 20% of the first $10,000 of qualifying expenses. This means that the maximum credit a taxpayer can receive is $2,000 (20% of $10,000).

Qualifying expenses include tuition and fees paid for higher education, but it's important to note that this credit applies to students enrolled in eligible colleges, universities, or other postsecondary educational institutions. Unlike the American Opportunity Credit, which is specifically for the first four years of higher education, the lifetime learning credit can be claimed for any level of education, making it a valuable option for a wide range of learners.

In summary, the correct answer accurately defines the percent and qualifying expense limit that determine the lifetime learning credit, allowing taxpayers to potentially benefit from significant educational expense deductions.