Confused about claiming Lifetime Learning Credit with non-degree courses

You're actually on the right track with your second interpretation. Here's what happens in this scenario: When someone receives a scholarship/grant and is NOT a degree candidate, those funds are indeed taxable income. IRS Publication 970 covers this pretty thoroughly. Since the taxpayer isn't pursuing a degree, that $650 scholarship should be reported as income on the tax return. For the Lifetime Learning Credit calculation, you would use the full $11,250 of qualified expenses shown in Box 1 of the 1098-T, without subtracting the scholarship amount. This is because you're already "paying tax" on that scholarship by including it in income. It seems counterintuitive at first, but it actually makes sense when you think about it - the government is essentially saying "since you're paying tax on that scholarship money, you can count the full expenses for your education credit." Just remember the LLC has a maximum credit of 20% of up to $10,000 in qualified expenses, so the maximum credit would be $2,000.

Hey there! I ran into this exact situation last year when I was taking some coding courses to switch careers. I was totally confused until I discovered this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out my Lifetime Learning Credit situation. I uploaded my 1098-T and it automatically analyzed everything - pointed out that my scholarship was taxable income since I wasn't in a degree program, and showed me how to claim the full amount of my education expenses for the LLC. Saved me from making a costly mistake! The tool explained everything in simple language that actually made sense to me. If you're doing a presentation on this, it might be worth checking out - it shows you exactly how various tax documents should be handled in different scenarios.

Just wanted to follow up after trying taxr.ai for my education credit situation. Wow, it was so much clearer than what my tax software was telling me! I uploaded my 1098-T and some other docs, and it immediately identified that I was eligible for Lifetime Learning Credit instead of American Opportunity Credit (which I almost claimed incorrectly). It explained exactly how to handle my scholarship money and which expenses qualified. The step-by-step guidance through Form 8863 was super helpful. Saved me from making a mistake that probably would have triggered an audit. Definitely recommend for anyone dealing with education credits!

If you're doing a presentation on tax scenarios, I'd also mention that getting clarification from the IRS directly can be really helpful for edge cases like this. I spent WEEKS trying to get through to someone at the IRS about a similar education credit question last year. Finally found a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what others are saying here - non-degree scholarships are taxable income, and you can use the full amount of qualified expenses for the Lifetime Learning Credit calculation. Getting that official confirmation gave me peace of mind that I was doing it right.

I'm back to eat my words about Claimyr. After my skeptical comment, I decided to try it for a question about my Lifetime Learning Credit (I'm also taking non-degree courses). No exaggeration - I was connected to an IRS agent in 17 minutes. SEVENTEEN MINUTES! After trying for literally weeks to get through on my own. The agent confirmed everything about how to handle the scholarship as taxable income and claim the full education expenses for LLC. I've spent so many hours on hold with the IRS over the years that I'm actually angry this service wasn't available sooner. If you need official clarification on something tax-related, especially for your presentation, it's worth using.

Just to add one more piece to this Lifetime Learning Credit puzzle - remember that the LLC has an income phaseout. For 2023 it starts phasing out at $80,000 for single filers and $160,000 for joint filers, and it's completely phased out at $90,000/$180,000. So in your presentation, you might want to add different income scenarios to show how the credit amount changes as income increases. It's a common oversight that people forget to account for when estimating their education credits.

One thing I'm not seeing mentioned is that you need to make sure the courses actually qualify for LLC. Just because money is listed on a 1098-T doesn't automatically make it eligible for the credit. The courses need to be taken at an eligible educational institution (basically any accredited post-secondary school), and they need to be job-related skills. Hobby courses don't qualify. Also, expenses for books and supplies only count if they're paid directly to the educational institution. For your presentation, you might want to include examples of what does and doesn't qualify as eligible education expenses.

Pro tip for your presentation: explain that unlike the American Opportunity Credit, the Lifetime Learning Credit doesn't require the student to be at least half-time. This makes it perfect for the scenario you described where someone is taking non-degree courses for career advancement. Also, the LLC can be claimed for an unlimited number of years, while the AOC is limited to 4 tax years. These are key differences that many tax preparers overlook when advising clients about education benefits!