A Guide to Your 1098-T Form a.k.a. Tuition Statement

If you are a college student (or a parent of one) then the 1098-T form is essential to your tax preparation. Whether you do taxes manually, using a tax software, or through a professional tax preparer, this form can reduce the amount of taxes you need to pay by the April 2019 deadline.

What is a 1098-T Form?

1098-T is also known as your tuition statement. It gets qualified students education credits or tuition deductions. The amount reflected on the form encompasses all fees paid to the school, even amounts paid in advance. It also includes amounts from loans, grants, or scholarships that are used to pay for tuition.

All qualified post-secondary learning institutions are required to send a 1098-T form for every tuition-paying student enrolled during the tax year. Qualified educational institutions include vocational schools, colleges, and universities. You can view which institutions are eligible in this list from the Federal Student Aid.

Understanding Your 1098-T

Begin by filling in the identifying information of the filer (can be you), the student, and the institution on the left side of the form. The right side shows all relevant financial information starting with the tuition fees and other educational expenses.

Qualified educational institutions report qualified expenses based on the actual amount paid by the student or the amount that the student is billed. If the school reports the student’s payment, then the figures are put in Box 1 of the 1098-T form. However, if the school bills the student, then the amount is stated in Box 2.

Whichever basis the school uses should be followed every year. A check mark on box 3, reserved for the school and the IRS, indicates a request by the institution to change their basis of reporting qualified expenses.

Qualified Expenses

Aside from your tuition and fees, qualified expenses include educational expenses such as course materials required for enrollment. However, it does not include expenses on:

  • transportation
  • student health fees
  • room and board
  • other personal or family expenses

Box 4 shows, if applicable, any adjustments made to your fees that may reduce your credit claims.

Box 5 shows any grants or scholarships received by the student during the year. Note: If you’re pursuing a degree and you use the scholarship or grant to pay for qualified educational expenses, it’s tax-free. Otherwise, the full amount is subject to tax.

Box 6 shows, if applicable, any adjustments made to the grants or scholarships. You should file an amended return since this may reduce credits or deductions you claimed in the previous year.

If payments from either box 1 or 2 are for the next year, box 7 is checked.

Full-time or Half-time?

There are certain tax benefits and credits that are specifically for full-time or half-time (half of the full academic workload set by the Department of Education) students. If you’re at least a half-time student pursuing your degree, box 8 is checked. If you’re a graduate student, box 9 is checked.

Box 10, the last box, reports any refunds or reimbursements from insurance that you received during that year. This will reduce deductions or credits you are eligible for and should receive.

Don’t miss out on the 1098-T form. This can give you significant tax credits or deductions.

Education Credits and Tuition Deductions

Education credits reduce the tax amount due while tuition deductions reduce the taxable income. Eligible taxpayers can only pick one or the other. Don’t be fooled by the set amounts or caps, you have to consider your tax situation and the limits or conditions of each option.

You can claim one of two types of credits: The Lifetime Learning Credit (LLC) and American Opportunity Credit (AOC).

The Lifetime Learning Credit (LLC)

The Lifetime Learning Credit of up to $2,000 per return is given to all eligible tuition-paying students. It’s calculated from 20% of the first $10,000 of qualified student expenses. This type of credit is non-refundable. So when the amount credited exceeds your tax return, you won’t be able to refund the difference.

Despite the non-refundability, there are advantages to the LLC. First, there’s no limit as to how many educational years you can claim the credits as opposed to the AOC. Secondly, even the fees you paid for non-credited subjects or classes are included in this type of credit.

American Opportunity Credit (AOC)

The American Opportunity Credit of up to $2,500 can be claimed per qualified student, and not per return. And unlike the LLC, the excess of the credits from the tax payment can be refunded (up to $1,000) even if you don’t have any due taxes to pay.

1098-T Deductions

Tuition and fees deduction adjusts your taxable income by as much as $4,000. Your deductions on Schedule A don’t have to be itemized. This allows for higher tax deductions as opposed to getting education credits.

Some taxpayers opt for the Lifetime Learning Credit, some go for the American Opportunity Credit. Tuition and fees deductions are optimal for certain cases. Just because taxpayer A benefits more from the LLC does not mean taxpayer B will benefit less from tuition and fees deduction. It’s best to compare the two types of credits and tuition and fees deduction to see which is more fitting for your personal tax situation.

How do I get my 1098-T Online

It’s easy to access your tuition statement online using the Tax Credit Reporting System. There is a student site that allows you to easily get a copy of your form.

  1. Go to http://www.1098t.com/
  2. Click “Access my Records” and log into the system
  3. Set a pin if necessary. You can contact (877) 467-3821 if you encounter issues with your PIN
  4. Select the tax year you are requesting for, up to 2 previous tax years
  5. You may download and print several copies of your 1098-T Form

Take note that the IRS  does not require taxpayers to send in their form 1098-T along with their tax returns and that the deadline for filing for this tax year is April 17, 2019. For more help on filing your tax return, check our guidelines post.