Navigating the 1098-T Form: Your Guide to Education Tax Benefits

Higher education represents a significant investment, and understanding the available financial aid and tax benefits is crucial for students and their families. The 1098-T form, a tuition statement provided by colleges and universities, serves as a key document for unlocking potential tax breaks related to educational expenses. This article provides a comprehensive overview of the 1098-T form, its contents, and how it can be used to claim valuable education tax credits.

What is the 1098-T Form?

The 1098-T form, often referred to as the "college tax form" or "tuition tax form," is an informational document that eligible educational institutions send to students by January 31st each year. This form reports the total payments of qualified education expenses made during the previous tax year. The school reports the amount to both the student and the Internal Revenue Service (IRS).

Qualified Education Expenses

Payments for tuition and fees at eligible institutions are considered qualified expenses that might appear on your 1098-T form. An eligible educational institution includes colleges, universities, vocational schools, and other post-secondary institutions that are eligible to participate in the Department of Education’s student aid programs.

Expenses Not Included

It's important to note that not all education-related expenses are considered qualified. Other payments or education-related expenses, like room and board, transportation, and similar personal costs, are not qualified education expenses, so they won’t show on your Form 1098-T.

Understanding the Boxes on Form 1098-T

The 1098-T form contains several boxes that provide specific information. Here's a breakdown of the key boxes:

Box 1: This box shows the total amount of qualified education expenses paid during the tax year. Due to a change in federal law, the amount of Qualified Tuition and Related Expenses (QTRE) PAID to your student account during the calendar year will be reported in Box 1 of the 1098-T form. This marks a change from previous reporting years in which the University was required to report QTRE BILLED to your student account for the calendar year in Box 2.
Box 3: This box indicates if the school changed its reporting method from the previous year. 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: This box shows any adjustments the school made for a prior year’s qualified expenses. If you withdrew from a college course and received a refund, it would be reflected here. If you have an amount showing in Box 4 of your 1098-T, it may reduce your allowable education tax credit claimed for the prior year.
Box 5: This box shows the amount of scholarships and grants that were paid directly to the school for the student's expenses.
Box 6: This box shows any adjustments the school has made to scholarships and grants reported on a previous year's 1098-T. This amount may affect the education benefits you claimed for the prior year.
Box 10: This box comes into play only in cases in which students have had expenses reimbursed under a "tuition insurance" policy.

Educational Tax Credits and Deductions

The 1098-T form is essential for claiming education tax credits and deductions, which can significantly reduce your tax liability.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit can be worth up to $2,500 for each eligible student. This credit only applies to undergraduate tuition and is limited to four years. To claim this credit, you must be enrolled in a degree program at least half-time.

A significant advantage of the AOTC is that it's partially refundable (up to 40%), meaning you (or your parents) could get a refund even if you don’t owe any taxes. Students who are under age 24 usually don’t qualify for the refundable credit, but their parents may qualify.

Lifetime Learning Credit (LLC)

The Lifetime Learning Credit works for undergraduate or graduate tuition and doesn’t require a course load or enrollment in a degree program. This is a credit of up to $2,000. The Lifetime Learning Credit can help pay for undergraduate, graduate, and professional degree courses to improve job skills-regardless of the number of years in the program.

Tuition and Fees Deduction (Formerly)

Formerly, the Tuition and Fees Deduction allowed up to $2,500 deduction for qualified higher education expenses.

Read also: Form 1098-T Explained

Eligibility for Tax Credits

Generally, you must receive a Form 1098-T from an eligible educational institution to be eligible to claim the American Opportunity Credit or the Lifetime Learning Credit. However, if you didn't receive one because the school wasn’t required to furnish the form, you may still be able to claim the credit, make sure that you otherwise qualify for the credit.

Retrieving Your 1098-T Form

Completed 1098-T forms are typically available to students online through their student portal or profile. Look for a section labeled "Tax Notification (1098T)" or "Academic Resources+." Forms for the most recent completed year are usually available online by January 31st. If you are no longer attending the university, contact the OneStop or student services department for assistance in retrieving your form.

Important Considerations

Professional Advice: The information provided here is for general guidance only and should not be considered professional tax advice. Consult with a qualified tax professional for personalized advice based on your specific circumstances.
Record Keeping: Keep a copy of your 1098-T form and all related documentation for your records.
University Guidance: The University cannot file taxes on behalf of students and cannot provide guidance on filing taxes. Please seek a professional tax preparer for additional information regarding filing taxes or guidance on claiming one of the tax credits.
Payment Posting: To assure that payment is posted during December of the current calendar year, please be sure checks are received in our office on or before December 17th.
Tax Law Changes: The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process.

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