Understanding Form 1098-T: A Comprehensive Guide to the Tuition Statement

The Form 1098-T, officially called the Tuition Statement, is an important American IRS tax form for students and their families seeking to leverage educational tax benefits. This document, provided by eligible educational institutions, reports the amount of qualified tuition and related expenses paid by a student during the tax year. Understanding this form is crucial for accurately claiming education credits and deductions, potentially reducing your tax liability.

What is Form 1098-T?

Form 1098-T, Tuition Statement, is an American IRS tax form filed by eligible education institutions (or those filing on the institution's behalf) to report payments received and payments due from the paying student. Tuition-paying students at eligible colleges or other post-secondary institutions should receive a copy of Internal Revenue Service Form 1098-T from their school each year.

Eligible Educational Institutions

An eligible educational institution is a college, university, vocational school, or other post-secondary educational institution. Eligible institutions include most colleges, universities, and vocational schools that are eligible to participate in the Department of Education’s student aid programs. Specifically, it admits as students those who have received a certificate of graduation from a secondary school. Programs that are otherwise eligible to participate in the Department of Education's student aid programs also qualify as eligible educational institutions.

Purpose of Form 1098-T

Form 1098-T was originally created in the Taxpayer Relief Act of 1997, alongside the Hope Credit and the Lifetime Learning Credit (and, later, the American Opportunity Tax Credit), to help taxpayers pay for postsecondary education. The main purpose of the form is to facilitate the claiming of education tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). These credits help offset the costs of higher education by providing a tax benefit to eligible students and their families.

While you are not required to attach IRS Form 1098-T to your tax return, the information contained within it is essential for accurately completing your tax return and claiming any eligible education credits or deductions.

Read also: 1098 Tax Form Guide

Structure of Form 1098-T

Form 1098-T consists of one page, with a red copy to be filed with the IRS, and a black copy to be kept for records or to be sent to the student. There are ten lines that require the institution's tax information as well as the student's, tuition payments received and billed, as well as the scholarships granted to the student.

The form contains various boxes, each reporting specific financial information. Here's a breakdown of what each box signifies:

Filer's Information: Includes the filer's name, address, phone number, and tax identification number, as well as the same information for the student. The name, Social Security Number and address on Form 1098-T were obtained from information provided to ASU, although the address shown on Form 1098-T is irrelevant for IRS income tax filing purposes. The single most important information on the form is your Social Security Number. Your Social Security Number must be correct.
Box 1: Payments Received for Qualified Tuition and Related Expenses: Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. Box 1 reports the qualified tuition and related expenses paid during the calendar year. Qualified tuition and related expenses are sometimes referred to as qualified education expenses, although the terms are not always interchangeable. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5.
Box 2: (Eliminated after 2017): In years prior to 2018, colleges had the option of completing either Box 1 or Box 2 related to Qualified Tuition and Related Expenses. Box 2 previously reported the amount billed for qualified tuition and related expenses. Congress has eliminated Box 2 From Form 1098-T.
Box 3: Change in Reporting Method: A checkbox to reflect if reporting method has been changed since the previous year. If the school reports the amount paid, it puts that figure in Box 1 of the form. A school generally has to use the same reporting method every year. If it changes its method-which requires IRS approval-it puts a check mark in Box 3.
Box 4: Adjustments to Prior Year's Qualified Tuition and Related Expenses: Box 4 of Form 1098-T reports adjustments made to qualified tuition and related expenses reported on a prior year Form 1098-T in Box 1. Shows how much money is reimbursed by an insurer. The amount reported in Box 4 represents a reduction in tuition paid during a prior calendar year. For example, if you paid Spring semester classes in December and withdrew from classes in January which resulted in a refund, Box 4 reports the decrease in paid tuition due to the withdrawal. The amount reported in Box 4 for adjustments to qualified tuition and related expenses may reduce any allowable education credit you may claim for the prior year.
Box 5: Scholarships or Grants: Box 5 of Form 1098-T reports the total of scholarships or grants administered and processed by the ASU Financial Aid and Scholarship Services (FASS) during the calendar year. Enter the total amount of any scholarships or grants that you administered and processed during the calendar year for the payment of the student’s costs of attendance. Scholarships and grants generally include all payments received from third parties (excluding family members and loan proceeds). This includes payments received from governmental and private entities such as the Department of Veterans Affairs, the Department of Defense, civic and religious organizations, and nonprofit entities. A scholarship or grant is administered and processed by you if you receive payment of an amount, whether by check, cash, electronic transfer, or other means, and such payment is designated as a grant or a scholarship by the payor, or the circumstances make it clear that the payment is a grant or scholarship.
Box 6: Adjustments to Prior Year's Scholarships or Grants: Box 6 of Form 1098-T reports adjustments made to scholarships or grants reported on a prior year Form 1098-T in Box 5. The amount reported in Box 6 represents a reduction in scholarships or grants reported for a prior calendar year. The amount reported in Box 6 for adjustments to scholarships or grants may affect the amount of any allowable tuition and fees deduction or education credit you may claim for the prior year.
Box 7: Amounts for an Academic Period Beginning in the Next Calendar Year: A checkbox indicating whether the amounts indicated in Boxes 1 or 2 also includes tuition paid or billed for the beginning of the following year. Box 7 indicates, if checked, that Box 1 includes amounts for an academic period beginning in the next calendar year.
Box 8: Half-Time Student: Box 8 shows whether you are considered to be carrying at least one-half the normal full-time workload for your course of study at ASU for at least one academic period during the calendar year. Check this box if the student was at least a half-time student during any academic period that began in 2023. A half-time student is a student enrolled for at least half the full-time academic workload for the course of study the student is pursuing. Your institution’s standard for a half-time student work load must equal or exceed the standards established by the Department of Education under the Higher Education Act and set forth in 34 C.F.R. If this box is marked, you meet one of the requirements for the Hope tax credit.
Box 9: Graduate Student: Box 9 shows whether you are considered to be enrolled in a program leading to a graduate degree, graduate-level certificate, or other recognized graduate-level educational credential. Check this box if the student was a graduate student.
Box 10: Tuition Insurance Reimbursements: Box 10 of the form comes into play only in cases in which students have had expenses reimbursed under a "tuition insurance" policy. Shows how much money is reimbursed by an insurer.

Key Considerations for Using Form 1098-T

Accuracy is Crucial: The two most important pieces of information on the form are your name and your Social Security Number. Both your name and Social Security Number must be correct and match that reflected on your social security card.
Qualified Tuition and Related Expenses: As defined per the IRS, Qualified Tuition and Tuition Related Expenses (QTRE) are tuition (including course fees, lab and music rental room fees, and course materials), student activities fees, and the one-time document fee. These are the only charges that can be used for claiming an education tax credit. The cost of course materials required to enroll in a class (e.g. books) is also included.
Expenses Not Included: Box 1 does not include payments for non-tuition related expenses such as housing, meal plans, health insurance, and other fees.
Scholarships and Grants: Scholarships or grants that exceed qualified tuition and related expenses are taxable income to the recipient. Scholarships are any funds paid to you. They can be the grant award the school provided, a Pell grant or SEOG, State Financial Aid, or those local rotary and foundation scholarships. On the latter, if they were sent to the college or made co-payable, then the college is including them in Box 5 of 1098T.
Tax Credits and Deductions: Tax credits are taken/reported on Form 8863. The Tuition deduction is on Form 8917. Scholarships are reported on line 7 of Form 1040, 1040A or 1040-EZ. There is usually a place in the tax software for wage income not reported on Form W2.
Who Paid: To qualify for the credit or deduction, you have to have made the payment and the recipient has to be your dependent. Payments by check or credit/debit card are easy for you to track. For loans, look at the borrower. Federal Direct Loans are issued to the student only, so technically not a payment from the parent. If you are a co-signer on a loan, then you likely can count it as a payment.
Consult a Professional: Many individuals will have unique circumstances that require different treatment. Please consult your tax preparer with all questions related to this document.

Historical Context and Changes to Form 1098-T

The Form 1098-T has undergone several changes since its inception:

2001: New rules for describing qualifying tuition were set in place.
2002: Institutions were now given the option to report either the payments billed or the payments received. There was also an option to report payments for the beginning of 2003.
2006: A checkbox was added to report changes to the institutions reporting method.
After 2017: Federally mandated tax reporting now mandates colleges report in Box 1.

Resources for Filing and Understanding Form 1098-T

To ease statement furnishing requirements, Copy B of Forms 1098-E and 1098-T are fillable online in a PDF format, available at IRS.gov/Form1098E or IRS.gov/Form1098T.

You may use Form W-9S, Request for Student’s or Borrower’s Taxpayer Identification Number and Certification, to obtain the student’s or borrower’s name, address, TIN, and student loan certification to be used when filing Form 1098-E or Form 1098-T.

Read also: Scholarship Reporting Guide

E-filing Requirements

The Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return e-file threshold. T.D. 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024. The IRS has developed IRIS, an online portal that allows taxpayers to e-file information returns after December 31, 2022, for 2022 and later tax years. In addition to these specific instructions, you should also use the current General Instructions for Certain Information Returns.

Institutional Responsibilities

If you are required to file Form 1098-T, you must furnish a statement or acceptable substitute, on paper or electronically, to the student. The global consent process must meet all the consent, disclosure, format, notice, and access period requirements for electronic furnishing of Forms 1098-T as required by paragraphs (a)(2) through (6) of Regulations section 1.6050S-2.

Pursuant to Regulations section 301.6109-4, all filers of Form 1098-T may truncate a student’s TIN (social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN)) on payee statements. Truncation is not allowed on any documents the filer files with the IRS. A filer’s TIN may not be truncated on any form.

Read also: 1098-T Form Explained

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