The income thresholds to claim the Lifetime Learning credit are the same as those for the Hope credit.
TUITION AND FEES DEDUCTION
You can deduct from taxable income the amount you paid in tuition and fees in 2008, up to $4,000. This deduction is claimed on the front of Form 1040; in other words, you can claim it even if you don't itemize your deductions.
The income limits are less restrictive than those on the Hope and Lifetime Learning credits: The deduction is phased out if your adjusted gross income exceeds $65,000 for an individual or $130,000 for a couple. It's gone entirely if your income exceeds $80,000 for an individual or $160,000 for a couple.
COLLEGE SAVINGS WITHDRAWALS
If you take money out of a 529 plan -- a state-sponsored college savings vehicle -- to pay eligible college bills, no part of the withdrawal is taxable, not even the previously untaxed investment earnings that have accumulated in the account.
This exclusion applies no matter how much you withdraw, and there are no income restrictions. But you can't claim the Hope or Lifetime Learning credit or the education deduction for expenses paid by a tax-free withdrawal from a 529 plan.
Beware: If you withdraw money from a 529 plan but don't use it for qualified education expenses, the investment earnings are not only taxable but also subject to a tax penalty.
EMPLOYER-PAID EXPENSES
If your employer pays for your college tuition, books or fees, $5,250 of the amount paid is not taxable.
AMERICAN OPPORTUNITY CREDIT
For college expenses in 2009 and 2010, the Hope credit is replaced by the American Opportunity Tax Credit, which provides more money -- as much as $2,500 per student -- and is available to more people.
Income limits don't kick in until your adjusted gross income exceeds $80,000 for an individual or $160,000 for a couple.
The credit is completely phased out once individual income tops $90,000 or joint income surpasses $180,000.