Navigating Form 1098-T: A Guide for High School Students Taking College Courses

High school students taking college courses may encounter Form 1098-T, Tuition Statement, which reports qualified education expenses. Understanding this form and its implications is crucial for both students and their parents when filing taxes. This article clarifies the purpose of Form 1098-T and explores the eligibility of high school students for education tax credits.

Understanding Form 1098-T, Tuition Statement

Form 1098-T is an American IRS tax form filed by eligible education institutions to report payments received and payments due from the paying student. The form consists of one page, with a copy for the IRS and a copy for the student's records. It contains 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.

Key Components of Form 1098-T:

Box 1: Reports the payments received for qualified tuition and related expenses during the calendar year.
Box 2: Reports the amounts billed for qualified tuition and related expenses during the calendar year. Note that this box has been eliminated.
Box 3: Indicates if the school changed its reporting method from the previous year.
Box 4: Shows any adjustments the school has made to qualified expenses reported on a previous year's 1098-T.
Box 5: Shows the amount of scholarships and grants that were paid directly to the school for the student's expenses.
Box 6: Shows any adjustments the school has made to scholarships and grants reported on a previous year's 1098-T.
Box 8: Indicates whether the student was at least a half-time student during the academic period.
Box 9: Indicates whether the student was a graduate student.
Box 10: Shows how much money is reimbursed by an insurer.

Tax Credits and Deductions for Education

The Tax Relief Act (TRA) of 1997 introduced tax incentives for education, including the Hope Credit and the Lifetime Learning Credit. These credits, along with the American Opportunity Tax Credit (AOTC), aim to help taxpayers offset the costs of postsecondary education. TRA also provides a deduction for the interest paid on qualifying student loans, reported on IRS Form 1098-E.

Available Education Tax Credits:

American Opportunity Tax Credit (AOTC): A credit of up to $2,500 of the cost of tuition, certain required fees, and course materials needed for attendance and paid during the tax year. Up to 40% of the credit (up to $1,000) is refundable, meaning you can get it back even if you don't owe any taxes.
Lifetime Learning Credit (LLC): A nonrefundable credit of up to $2,000 for qualified tuition and related expenses paid for all years of post-secondary education. There is no limit on how many times you can claim the Lifetime Learning Credit (LLC).

Key Differences Between AOTC and LLC:

Feature	American Opportunity Credit (AOTC)	Lifetime Learning Credit (LLC)
Credit Amount	Up to $2,500 per student	Up to $2,000 per tax return
Refundable Portion	Up to $1,000	None
Eligible Expenses	Tuition, required fees, and course materials (books, supplies, and equipment)	Tuition and required fees
Student Requirements	Must be pursuing a degree or other credential, be enrolled at least half-time for at least one academic period beginning during the year, not have completed the first four years of higher education, and not have a felony drug conviction.	Can be used for any course of instruction at an eligible educational institution, including courses taken to acquire job skills.
Years Claimed	Limited to the first four years of higher education	No limit
Income Limitations	To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married taxpayers filing jointly). If your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married taxpayers filing jointly), the amount of your credit is reduced. If your MAGI is above $90,000 ($180,000 if married filing jointly), you can't take the credit.	To claim the full credit, your modified adjusted gross income (MAGI) must be $69,000 or less ($138,000 or less for married taxpayers filing jointly). If your MAGI is over $69,000 but less than $79,000 (over $138,000 but less than $158,000 for married taxpayers filing jointly), the amount of your credit is reduced. If your MAGI is above $79,000 ($158,000 if married filing jointly), you can't take the credit.

Do High School Students Qualify?

High school students taking college courses may be eligible for education tax credits, but it depends on the specific circumstances.

Factors Affecting Eligibility:

Enrollment Status: To qualify for the AOTC, the student must be pursuing a degree or other credential and be enrolled at least half-time for at least one academic period beginning during the year. High school students may not meet the degree requirement if they are not officially enrolled as a degree candidate.
Qualified Expenses: The expenses must be for qualified tuition and related expenses, including tuition, required fees, and course materials (for AOTC). If the state pays for the courses, as in the case of Ohio's College Credit Plus (CCP) program, there may be no out-of-pocket expenses to claim.
Dependency Status: The student must be claimed as a dependent on someone else's tax return. The person who can claim the student as a dependent may be able to claim an education credit.
Income Limitations: The student's or the parents' income (depending on who is claiming the credit) must be within the AOTC or LLC income limits.
Prior Education: AOTC is limited to the first four years of higher education.

Special Considerations:

College Credit Plus (CCP) Programs: In states like Ohio, where CCP programs cover the cost of college courses for high school students, a 1098-T form may only be generated if the student pays for a course that doesn't meet the dual credit criteria.
Dual Enrollment: High school students enrolled in college courses may be considered degree-seeking students, making them eligible for the AOTC if they meet the other requirements.

Navigating the 1098-T Form and Tax Credits

If a high school student receives a 1098-T form, it doesn't automatically mean they qualify for an education tax credit. The form is informational and assists in determining eligibility. Taxpayers can use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to claim the AOTC or LLC.

Read also: Job Skills for Students

Key Steps:

Review the 1098-T form: Check the amounts in Box 1 (payments received) and Box 5 (scholarships and grants).
Determine eligibility: Assess whether the student meets the enrollment, qualified expense, and dependency requirements for the AOTC or LLC.
Complete Form 8863: Use the information from Form 1098-T and other records to calculate the education credit.
File with Form 1040: Submit Form 8863 with Form 1040 or 1040-SR to claim the credit.

Important Considerations:

Record Keeping: Keep records of student enrollment and payments made for qualified tuition and related expenses.
Tax Advice: Colleges and universities cannot offer tax advice regarding tax forms. Consult a tax professional for personalized guidance.
Accuracy: Ensure the student's name and Social Security number are correct on Form 1098-T.
Amending Returns: If the student's return was incorrectly prepared, it's essential to amend it. Youâre legally responsible for whatâs on your return, even if someone else prepares it.

Special Situations

Nonresident Aliens: Nonresident aliens are generally not eligible for education tax credits.
Students on an F-1 Visa: A student on an F-1 Visa doesn't count in determining whether theyâre a resident alien under the substantial presence test.
Schools Not Required to Furnish Form 1098-T: If you didn't receive a Form 1098-T because your school wasnât required to provide it to you for 2024 or your school closed and didnât give it to you, you can still claim an education credit for tax year 2024. Keep records that show student enrollment and the amount of paid qualified tuition and related expenses.

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