The 1098-T form helps you and the IRS determine if you are eligible for education-related tax credits like the American Opportunity Credit or Lifetime Learning Credit.
You can find more information about these tax benefits by visiting the IRS website or speaking with a qualified tax pro.
Your 1098-T will list qualified tuition and fees you paid during the year. This differs from non-qualified charges, including housing, transportation, books, and other personal expenses.
Tuition and Fees
Your 1098-T form contains information that can help you determine if you qualify for certain education tax credits. These include the Lifetime Learning Credit and American Opportunity Tax Credit.
Two main types of qualified educational expenses may be reported as an education credit: tuition and fees and course material costs. The Tuition and Fees Deduction allows you to exclude up to $4,000 in qualified tuition and related expenses from your income.
Qualified expenses include tuition, fees, and other required charges for enrollment or attendance at an eligible institution. They also include any waivers or refunds received in a given year that reduce the amount of qualified expenses you owe for that year.
You should also count costs for books, supplies, and equipment necessary to your degree program or for acquiring and improving job skills. However, you should not count costs for insurance, transportation, or living expenses as an education credit.
In some cases, you may be able to claim reimbursements from a “tuition insurance” policy. These policies reimburse students when they have to withdraw from school for medical reasons or other family emergencies.
If you have a tuition insurance policy, you should check Box 10 on your 1098-T to report any reimbursements. These reimbursements will reduce the amount of credits you owe on your tax return.
Your tuition and fees are also reported in Box 1. These amounts represent the sum of qualified charges that were paid to the University during the academic year you are reporting. They are generally charged for academic terms that begin in January of the year being reported but can be billed to students in November or December.
Many students have charges from November or December that were not paid until January of the following year. This can cause a difference between the amount that was charged in your Bursar statement and the number of qualified charges that was reported on your 1098-T.
If you have any questions about your financial aid, please contact the Student Financial Services Office. We can help you with questions about your eligibility for scholarships and grants, tuition and fees, and other educational benefits. We can also assist you with any financial aid adjustments that may be necessary.
Scholarships and Grants
Scholarships and grants are generally tax-free when used to pay for qualified education expenses, such as tuition and fees. However, if you use all or most of the money for non-qualified education expenses, it is taxable income.
The IRS outlines the rules for scholarships and grants in Publication 970. It also provides information about the American Opportunity (AOTC) and Lifetime Learning Credit, as well as student loan forgiveness and coverage through Section 529 prepaid tuition and college savings plans.
If you have a tuition insurance policy, the 1098-T will report any reimbursements you receive under the policy in box 10. This may reduce any education credits that you are eligible for, including the tuition and fees deduction.
Some schools may also report other types of scholarships or grants on the form. This can include stipends, student employment, work-study, and other awards not directly paid by the school.
Whether your scholarships and grants are taxable is a complex matter that depends on the nature of the award. For example, some scholarships are taxable if you agree to do something in return for the money, such as working as a teaching assistant or a student volunteer.
You should always read the fine print to see if the scholarship or grant is taxable and how it affects your taxes. This can help you decide if the award is worth the effort or would be better to turn it down.
If you decide that the scholarship or grant is taxable, write the taxable amount on line 1 of your federal income tax return. Alternatively, you can report the taxable portion of your scholarship on a Form W-2 and place it under “Wages, salaries.”
When reporting a taxable scholarship or grant on your income tax return, remember that you should subtract the taxable portion from your gross income before adding the taxable part to your total income. This will help you avoid paying tax on the taxable portion of the award.
Scholarships and grants are a great way to pay for college or graduate school, so it is important to make sure you understand how they will impact your taxes. If you have any questions about your tax status or the impact of financial aid, contact your accountant for guidance.
Adjustments
In the United States, eligible institutions participating in federal financial aid programs send students a form called a 1098-T. It shows information about qualified tuition, related expenses, and scholarships and grants, whether taxable or not. This information may help you determine whether you can claim education credits or deductions when filing your tax return.
Eligible educational institutions include public, private, and nonprofit post-secondary schools. Often, these schools are accredited and participate in the government’s student aid programs.
The 1098-T is a standardized form used by eligible institutions to report student information to the IRS. It is required by the Taxpayer Relief Act of 1997. It lists the student’s name, address, taxpayer identification number (TIN), enrollment status, amounts for qualified tuition and related expenses, and scholarships and/or grants, whether taxable or not.
It also outlines any adjustments the school made to the tuition reported on a previous year’s 1098-T. This can happen for a number of reasons, such as if a student withdrew from a class or received a refund for the amount they paid.
A 1098-T can also include adjustments to scholarships and grants that the student received during the year. If a student received more scholarship or grant money than they were allowed to claim, this can affect their eligibility for the credit.
These adjustments can be complicated and should always be reviewed with a tax professional. If you’re unsure if your educational expenses are deductible, contact a tax preparer to ask questions and get guidance.
Two types of education-related tax benefits can be claimed: a tuition and fees deduction and a credit. A tuition and fees deduction allows you to deduct up to $4,000 from your income, lowering your adjusted gross income (AGI) and reducing the amount of taxes you owe.
Alternatively, the Lifetime Learning Credit can be claimed for qualifying higher education expenses, regardless of your AGI or whether you’re enrolled in a degree program. This nonrefundable credit can help you lower your tax bill by up to $2,000 per return.
Reimbursements
If you have a student account at an eligible educational institution, the school will report qualified tuition and related expenses paid or billed to your student account on Form 1098-T. You may be able to take the tuition and fees deduction or an education credit on your taxes for these payments.
The college will also report adjustments to your tuition and fees if you withdraw or receive a refund from a course during the year. This may affect your eligibility for the American Opportunity Credit, the Lifetime Learning Credit, or the Higher Education Tuition and Fees Deduction.
Box 1 of the 1098-T reports amounts billed or received for qualified tuition and related expenses during the calendar year. This includes all payments, including financial aid, personal payments, sponsored payments, and any scholarships or grants you may have received related to those payments.
You should receive a 1098-T in January of each year unless you consent to be sent electronically. You can sign up for electronic delivery by visiting Heartland ECSI, the service provider for South Dakota Public Universities. If you choose to be mailed, the tax document will be delivered in February of the following year.
If you have a student account at an approved educational institution, the institution must file and furnish Form 1098-T for each qualifying payment of qualified tuition and related expenses to you during the calendar year. The IRS uses this information to determine your enrollment and eligibility for certain education credits.
In years prior to 2018, the 1098-T included a figure in Box 2 representing the qualified tuition and related expenses billed to your student account during the year. Beginning with the tax year 2018, Baylor reports in Box 1 the number of payments received during the calendar year for qualified expenses.
BOX 6 of the 1098-T reports adjustments made to scholarships or grants reported on a prior year Form 1098-T in Box 5. The amount of scholarships or grants you may receive during the calendar year (including those not reported on your 1098-T) may reduce the amount of education credit you may claim for the year.
