Created by the Taxpayer Relief Act of 1997, the Lifetime Learning Credit reduces the amount of your Federal taxes based on qualifying "out-of-pocket" educational expenses paid for yourself, your spouse or your dependent child. Qualifying out-of-pocket expenses include tuition and fees less any grants and scholarships received. It does not include room, board, books, and transportation.

Through the Lifetime Learning Credit, you may be able to claim a tax credit of up to $2,000 (20% of the first $10,000). This credit is calculated per family, not per student.

The maximum credit is the same, no matter how many family members are in school. You can claim this credit at any time during a student's education at an eligible school. The student needs only to be enrolled in one course.

For 2006, if the total qualified education expenses for a student are more than $7,500, it will generally be to your benefit to claim the Lifetime Learning Credit.

Restrictions
The Lifetime Learning Credit you are allowed may be limited by the amount of your income and the amount of your tax. Only one taxpayer (either the student or the parent) may claim this tax credit. In addition, you may claim only one education tax credit — either the Hope Credit or the Lifetime Learning Credit — per student, per tax year. If you pay qualified education expenses for more than one student, you can claim the Hope Credit for one student and the Lifetime Learning Credit for the other, in the same year.

Tax credits and deductions are different: a tax credit directly reduces the amount of income tax you may have to pay, while a deduction reduces the amount of income subject to tax.

The information contained in this section is from IRS Publication 970: Tax Credits for Education. PNC and Villanova University do not provide tax advice and makes no representation or warranty as to the accuracy of the information. Please consult your tax advisor for tax advice matters contained in this section.

For more information, visit www.irs.gov or call 1-800-829-1040.