Box 4 of the 1098-T form shows any adjustments the school has made to qualified expenses reported on a previous year's 1098-T. If it turns out a previous year's expenses were lower than initially reported, the student may be responsible for additional tax. You must recapture (repay) any excess credit received.
How do I figure the amount of the adjustment?
The IRS provides this example showing how to figure the recapture of the excess credit:
You paid $7,000 tuition and fees in August 2024, and your child began college in September 2024.
You filed your 2024 tax return on February 17, 2025, and claimed an American opportunity credit of $2,500. After you filed your return, you received a refund of $4,000. You must refigure your 2024 American opportunity credit using $3,000 of qualified education expenses instead of $7,000.
The refigured credit is $2,250. The increase to your tax liability is $250. Include the difference of $250 as additional tax on your 2025 tax return.
You can use the program to assist you in refiguring this amount. Simply plug in the new expenses into the correct tax year to see the new credit allowed.
Where do I report the recapture on my tax return?
Report your recapture in the program as follows:
- Federal Section
- Other Taxes
- Other Additional Taxes
- Tax from recapture of an education credit