Do Therapists Qualify for the Lifetime Learning Tax Credit?

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October 5, 2022
October 5, 2022
Bryce Warnes
Content writer
Fact-Checked by Richard Huynh, Tax Attorney
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Yes, therapists can use the Lifetime Learning Tax Credit to reduce the cost of their continuing education. It applies to individuals and their spouses and dependents.

Not everyone qualifies for the credit, however. Depending on your income level, you may only be able to claim a portion of the credit—or none at all.

Here’s everything you need to know about the Lifetime Learning Tax Credit and how it may impact your therapy practice.

What is the Lifetime Learning Tax Credit?

The Lifetime Learning Tax Credit lets you pay less in taxes as a way to offset the cost of getting post-secondary education.

The credit is equal to 20% of the first $10,000 of your total tuition expense for the year, to a maximum of $2,000. It applies to any tuition expense, regardless of your course load. Even if you are only taking one course at a local college, there’s a good chance you still qualify for the credit.

If you have dependents or a spouse, and you pay the cost of their tuition (or give them money to put towards their tuition), you can claim the Lifetime Learning Tax Credit. The $2,000 limit applies to your entire household, however. No matter how many individuals’ tuition you pay, the most you can claim as a tax credit is $2,000.

Who qualifies for the Lifetime Learning Tax Credit?

In most cases, you are able to claim the full amount of the Lifetime Learning Tax Credit if:

  • You paid tuition expenses for an eligible educational institution during the year for which you’re filing a tax return. Eligible institutions include universities, colleges, and vocational schools.
  • The tuition paid was for yourself, your dependent, or your spouse.

The income phaseout for the Lifetime Learning Tax Credit

The tax credit phases out at higher income levels. Meaning, the more income you earn, the less tax credit you’ll be able to claim. The limits are adjusted every year in order to keep pace with inflation. 

The Lifetime Learning Tax Credit phaseout:

  • If your modified adjusted gross income (MAGI) for the year is less than $80,000 (or $160,000 for spouses filing jointly), you may claim the full tax credit.
  • If your MAGI is between $80,000 and $90,000 ($160,000 – $180,000 for spouses filing jointly), the amount of the tax credit you can claim is reduced.
  • If your MAGI is over $90,000 ($180,000 for spouses filing jointly), you no longer qualify for the tax credit.

Expenses the Lifetime Learning Tax Credit does NOT apply to

The Lifetime Learning Tax Credit strictly applies to the cost of tuition. 

That expense does not include:

  • Textbooks
  • Travel and accommodations
  • Student union dues
  • Student healthcare or other benefits
  • Any other non-tuition costs you incur in the course of pursuing continuing education

How to claim the Lifetime Learning Tax Credit on your tax return

To claim the Lifetime Learning Tax Credit, you must compute it on IRS Form 8863, which ultimately will flow to and be reported on your Form 1040.

Note that, in this instance, you’re claiming the Credit on a personal expense, not a business expense. 

If your therapy practice is a sole proprietorship, an S corporation, a partnership, or a limited liability company (LLC) electing to file as any of these entity types, you do not claim the credit on your business return. 

First time filing taxes for your therapy practice? Learn about 5 differences between personal and business tax returns.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

Bryce Warnes is a West Coast writer specializing in small business finances.

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