Why Did I Receive a Form 1098-T from My School?
Editor’s Note: This article was originally published on January 20, 2017.
If you are a college student, you’ll probably get a Form 1098-T, a tuition statement sent from your college or university, right around tax time. To help you understand what this form is all about, I’ve outlined what the form reports and how it affects your taxes.
First off, your 1098-T tax form will show you the amount you paid for qualified education expenses (in Box 1). The amount is reported by the school to you and to the IRS.
Qualified Expenses Included on the 1098-T Tax Form
Tuition and fees at eligible institutions are considered qualified expenses that might appear on your 1098-T form. They can also include certain course materials if required to for enrollment.
However, other expenses, like room and board, transportation and similar personal costs are not qualified. So, amounts for those expenses will not be reflected on your Form 1098-T. Also, tuition for continuing education courses that are not taken for academic credit, or that are sports or hobby related may not be qualified expenses.
What Is an Eligible Institution?
An eligible educational institution can be a college, university, vocational school or other institution. The school must be eligible to participate in the Department of Education’s student aid programs. (View the full list of eligible institutions.)
What Should You Do With Form 1098-T?
The information on the form is required for you to claim education credits on your tax return. There are two education credits (discussed below) that can be worth thousands of dollars. Using the information on the 1098-T Tax Form will let you calculate the credit you (or, sometimes, your parents) can claim on your tax return.
There are two education credits you may be eligible for based on your qualifying expenses:
- The American Opportunity Tax Credit can be worth up to $2,500. And, because the credit is partially refundable (up to 40%), you (or your parents) could get a refund even if you don’t owe any taxes. That’s right, the government could send you a check up to $1,000 to help with your education expenses. Students who are under age 24 usually don’t qualify for the refundable credit, but their parents may qualify. This credit only applies to undergraduate tuition and is limited to four years. You must be enrolled at least half time in a degree program to claim this credit. Half-time status is determined by the college and is shown on the Form 1098-T.
- The other credit is the Lifetime Learning Credit, which works for undergraduate or graduate tuition and does not require a course load or enrollment in a degree program. This is a credit of up to $2,000, and while it’s not refundable, it’s still a great way to reduce the tax you owe.
Adjustments Shown on Form 1098-T
Your 1098-T form also reflects changes to your educational expenses from the prior year. For example, if you withdrew from a course and received a refund. Or, if you received a scholarship that reduced what you would have owed.
- Box 4 shows any adjustments that your school made for a prior year’s qualified expenses. If you have an amount showing in Box 4 of your 1098-T, it may reduce your allowable education credit claimed for the prior year. That in turn may result in an increased tax liability for the current tax year.
- Box 6 shows adjustments to scholarships or grants you received for a prior year. This amount may affect your education benefits you claimed for the prior year. You may have to file an amended income tax return (Form 1040X) for the prior year.
Note: qualified tuition expenses paid for with an education loan is still eligible for one of the education credits.
1098-T Tax Forms Questions?
A 1098-T Form has valuable information that you may use to claim an education credit. And, a qualified tax professional is a great resource to help you and/or your family figure out which education tax benefits are best for you.
If you need assistance, one of our knowledgeable tax pros are happy to help.
Learn more about notice CP05A, why you received it, and how to handle an IRS CP05A notice with help from the tax experts at H&R Block.
Do you need to know how to read Form W-2? Learn more about this wage and tax statement and get tax answers at H&R Block.
Learn more about the IRS Whistleblower Program, a newer initiative from the IRS that rewards people who provide valid information about tax scams.
You can be personally penalized if your business fails to pay employment tax. Read the IRS definition and get more insight from the experts at H&R Block.