5 FAQs on Form 1098-t

Form 1098-T, is a tuition statement that is sent by your college or university to you and a copy to IRS .Therefore , this statement will show you the amount you paid for qualified education expenses (in Box 1). The importance of this form is that the amount shown as qualified education expense in the Form 1098-T issued by eligible institution , becomes a basis for claim of certain tax exemption and credit . So, a 1098-T Form has valuable information that you may use to claim an education credit or claim scholarship tax free.

1. What Is an eligible Institution?

An eligible educational institution can be a college, university, vocational school or other institution eligible to participate in the Department of Education’s student aid programs. (View the full list of eligible institutions.)

2.What are Qualified Expenses Included on the 1098-T Tax Form?

Following expenses are considered qualified expenses

  • Tuition and fees .
  • Certain course materials if required to for enrollment.

Expense not included

Following expenses are not included in qualified education expense

  1. room and board,
  2. transportation and 
  3. similar personal costs are not qualified.
  4. tuition for continuing education courses that are not taken for academic credit, or that are sports or hobby related may not be qualified expenses.

3.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.

4. What education Credits is based on Form 1098-t ?

There are two education credits you may be eligible for based on your qualifying expenses:

  1. 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. 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.
  2. You can also claim Lifetime Learning Credit upto $ 2,000 which works for undergraduate or graduate tuition and does not require a course load or enrollment in a degree program.

5. What adjustments are displayed 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.