 Most of this information comes from Publication 970, Tax Benefits for Education Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're at the bottom where the credits are located. Remembering the first half of the income tax formula is in essence an income statement, although a strange one ending at taxable income, similar to the bottom line of an income statement being net income. We then calculate the tax on taxable income, not using one rate, not using a flat tax, but using the progressive tax system to get to the tax before credits and other taxes. And then we get to the credits and other taxes like self-employment tax and stuff like that. And then we've got the payments in the form of withholdings generally or estimated tax payments to get to the tax refund or amount due. Remember that we like credits. They're similar to deductions and that we like them both. But if we could get a dollar credit versus a dollar deduction, we would rather have the dollar credit typically because we get the full dollar of benefit as opposed to the dollar deduction, which simply decreases the taxable income and the benefit will be dependent upon our tax rate. Also remember that the credits could come in the form of non-refundable and refundable credits. Non-refundable credits do not take the tax liability below zero. The refundable credits can if they do then we're using the tax code not as a tax system in that case, but kind of as a welfare or benefit program for that part of the credit. All right, lifetime learning credits. What expenses qualify? So this is going to be similar to what we looked at in the American Opportunity Credit, but not exactly the same. So you'll see some similarities, but there will be differences as well. All right, the lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent you claim on your tax return. So generally the credit is allowed for qualified education expenses paid in 2022. So we're kind of on that cash-based system. When did we pay for the credits? For an academic period beginning in 2022 or the first three months of 2023? So we have that same cutoff thing. We've seen a few times in prior presentations. So we're in a cash-based system, but we still have that like three months if we paid in 2022, but the school is starting in 2023. For example, if you paid $1,500 in December 2022 for qualified tuition for the spring 2023 semester beginning in January 2023, you may be able to use the $1,500 in figuring your 2022 credit. Academic period. What does that mean? An academic period includes a semester, trimester, quarter, or other period of study, such as summer school session as reasonably determined by the educational institution. So usually they're somewhat standardized. You got semesters, trimesters, quarters. Sometimes they do some weird stuff at some schools, but they have to have some kind of system so you could talk to the school themselves, the educational institution to determine their academic period structure. If an educational institution uses credit hours or clock hours and doesn't have academic terms, each payment period can be treated as an academic period paid with borrowed funds. You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan, similar to what we saw when we went over this stuff with the American opportunity credit. And remember, the general idea would be, can you qualify for the American opportunity credits? If you can, it's usually more beneficial. Then we go to the lifetime learning credit, which is more broad in the capacity to be able to qualify for it. Although the expenses that may qualify for the lifetime learning credits might be more narrow than the American opportunity credit. So it's more likely you qualify for it, but possibly less expenses than would be qualified for it. So because it's more narrow in that range. Okay, you can claim a lifetime learning credit for qualified education expense paid with the proceeds of a loan. So if you get a loan, then you could still, that's not free money. So you're going to be paying the loan for the education. You're still paid for the education because you can have to pay back the loan generally with interest rent on the purchasing power of the loan. You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. So treat loan distribution disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Student withdrawals from class. You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. So if you withdraw from the class, if it's after a certain date typically you don't get a refund and therefore you still paid the money and it possibly could go towards an education credit. If you get the refund, then you got to get into the weeds of the refunds. You got the money back. You didn't really pay it. So if you got the money back in the same year that you paid it, then you'd have to reduce the amount of the expenses by the refund generally. Qualified education expenses for purposes of the lifetime learning credits, qualified education expenses are tuition. That's fairly straightforward and certain related expenses required for enrollment in a course at an eligible educational institution. That's where the more kind of fuzzy language is at what exactly does it mean to have certain related expenses required for the enrollment and so on. The course must be either part of a post-secondary degree program or taken by the student to acquire or improve job skills. That's a little bit more expansive than the American Opportunity Credit because the American Opportunity Credit typically has to be geared towards some kind of decree or certificate and they tacked on here to acquire or improve job skills. So once again the course must be either part of a post-secondary degree program or taken by the student to acquire or improve job skills. Our eligible educational institution, an eligible educational institution is any college university vocational school or other post-secondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. Most of them are because that's how they get a lot of their money is through basically people taking out loans in order to pay for the education. So it includes virtually all accredited public non-profit and proprietary privately owned profit making post-secondary institutions. Bit of a tongue twister, a lot of peas in that one. Peter Piper picked a pickle peppers. Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid. That's the FSA programs. Related expenses. So what are these? Let's get down into the weeds on this stuff. Student activity fees and expenses for course related books, supplies and equipment. Equipment specialist. Are included in qualified education expenses. Here's the key. Only if the fees and expenses must be paid to the institution for enrollment or attendance. That's a bit more restrictive than the American Opportunity Credit where you didn't have the thing where you have to basically buy it in essence from the institution. So a bit more restrictive. So once again, you'll want to get the American Opportunity Credit if you qualify for it. But it's more restrictive to qualify for the American Opportunity Credit to qualify for the Lifetime Learning Credit. It's more expansive. So you're more likely to be able to take the credit. But the number of expenses then that will be related expenses to calculating the credit are actually less expensive as we could see here. They look similar. A lot of similarities but less expensive. Prepaid expenses. Qualified education expenses paid in 2022 for an academic period that begins in the first three months of 2023 can be used in figuring and education credit for 2022 only. See academic period early or for example, if you pay $2,000 in December 2022 for qualified tuition for the 2023 winter quarter that begins in January 2023, you can use that $2,000 in figuring and education credit for 2022 only if you meet all other requirements.