For students and parents of college students, one important form to be aware of is the IRS Form 1098-T. This form is used to report information about qualified tuition and related expenses, and it can help students and parents claim valuable tax credits and deductions.
In this article, we’ll provide an overview of Form 1098-T and how it’s used. We’ll also cover some common questions and issues that arise when filing taxes with this form.
What is Form 1098-T?
Form 1098-T is a tax form used by colleges and universities to report information about qualified tuition and related expenses to the Internal Revenue Service (IRS) and students or their parents. The form includes the following information:
- The student’s name, address, and Social Security number or Taxpayer Identification Number (TIN).
- The name, address, and taxpayer identification number of the school.
- The amounts paid for qualified tuition and related expenses during the year.
- Scholarships or grants received by the student during the year.
- Adjustments made for prior years.
The purpose of Form 1098-T is to help students and parents claim tax credits and deductions related to education expenses. Specifically, the form can be used to claim the following tax benefits:
- The American Opportunity Credit: This credit provides up to $2,500 per eligible student for the first four years of college. To claim this credit, the student must be enrolled at least half-time in a degree or certificate program and not have completed four years of post-secondary education.
- The Lifetime Learning Credit: This credit provides up to $2,000 per tax return for post-secondary education expenses, including tuition and fees. There is no limit to the number of years this credit can be claimed.
- Tuition and Fees Deduction: This deduction allows taxpayers to deduct up to $4,000 in qualified education expenses from their taxable income.
Who receives Form 1098-T?
Generally, students who pay qualified tuition and related expenses during the year will receive Form 1098-T from their college or university. However, there are some exceptions to this rule:
- Nonresident alien students: Students who are not U.S. citizens or permanent residents are not required to receive Form 1098-T.
- Students whose qualified expenses are entirely covered by scholarships: If a student’s qualified education expenses are entirely covered by scholarships, the school is not required to send a Form 1098-T.
- Students whose qualified expenses are paid by a third party: If a student’s qualified education expenses are paid by a third party, such as an employer or government agency, the student may not receive a Form 1098-T. Instead, the third party will receive the form.
It’s important to note that even if a student does not receive a Form 1098-T, they may still be eligible for education-related tax credits and deductions. In this case, the student will need to keep records of their qualified education expenses and scholarships, or grants received.
When is Form 1098-T issued?
Colleges and universities are required to issue Form 1098-T to eligible students by January 31st of the following year. This means that students should receive their forms by early February.
However, it’s important to note that some schools may issue the form electronically rather than in paper form. In this case, students will need to access their school’s online portal or student account to download and print the form.
How to use Form 1098-T?
Once a student receives their Form 1098-T, they will need to use it to claim education-related tax benefits. Here’s how to use the form:
- Review the information: The first step is to carefully review the information on Form 1098-T to ensure that it’s accurate. If there are any errors, the student should contact their school’s financial aid office to have the information corrected.
- Determine eligibility for tax credits and deductions: Next, the student should determine if they are eligible for any education-related tax credits or deductions. The American Opportunity Credit and Lifetime Learning Credit have specific eligibility requirements, so it’s important to review the IRS guidelines carefully. The Tuition and Fees Deduction is available to taxpayers who do not claim either of the two credits mentioned above.
- Complete tax forms: Finally, the student or their tax preparer will need to complete the appropriate tax forms to claim the tax credit or deduction. The American Opportunity Credit and Lifetime Learning Credit are claimed on Form 8863, while the Tuition and Fees Deduction is claimed on Form 8917.
Common issues and questions related to Form 1098-T
Why is the amount on my Form 1098-T different from what I paid for tuition and fees?
The amount listed on IRS Form 1098-T is based on the total amount of qualified tuition and related expenses paid during the calendar year, regardless of the academic period to which the payment applies. This means that the amount listed on the form may include expenses that were not paid during the tax year, such as charges for a future semester. Additionally, some charges may be excluded from the form, such as room and board or insurance fees. It’s important to review the form carefully and compare it to your records to ensure that it’s accurate.
Can I claim education-related tax benefits if I don’t receive Form 1098-T?
Yes, you can still claim education-related tax benefits even if you don’t receive IRS Form 1098-T. To do so, you will need to keep records of your qualified education expenses, such as receipts and statements from your school. You will also need to provide documentation of any scholarships or grants you received to cover those expenses.
What if I received a scholarship or grant that covers all of my qualified education expenses?
If you received a scholarship or grant that covers all of your qualified education expenses, you will not be eligible to claim education-related tax benefits on those expenses. However, you may still be able to claim tax benefits on other education-related expenses, such as books or supplies.
Can I claim education-related tax benefits if I am claimed as a dependent on someone else’s tax return?
Yes, you may be able to claim education-related tax benefits even if you are claimed as a dependent on someone else’s tax return. However, the person claiming you as a dependent will need to follow certain rules and guidelines when claiming those benefits.
Conclusion
IRS Form 1098-T is an important tax form that can help students and parents claim valuable tax credits and deductions related to education expenses. It’s important to review the form carefully and compare it to your records to ensure that it’s accurate. If you have any questions or concerns about Form 1098-T or education-related tax benefits, don’t hesitate to consult a qualified tax professional or financial advisor.
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