To claim an education credit, you'll need your Form 1098-T, Tuition Statement, from your school. The amount of qualified education expenses depends on the amounts reported in Boxes 1 and 5 of that form, along with any additional eligible expenses you paid, such as required books and supplies.
According to IRS rules, you must reduce your qualified education expenses by any tax-free scholarships or grants you received. In most cases, scholarships and grants cannot be included in the expenses used to claim an education credit.
Our program will automatically determine which education tax benefit provides the greatest advantage based on the information you enter.
Common 1098-T Scenarios
Box 1 Has an Amount, Box 5 Is Blank
If your Form 1098-T shows an amount in Box 1 and Box 5 is blank or zero, your qualified education expenses generally equal:
Box 1 amount + any additional eligible books and supplies
Example:
- Box 1: $3,000
- Box 5: $0
- Required books and supplies: $200
Qualified education expenses: $3,200
Box 1 and Box 5 Both Have Amounts
If there are amounts in both boxes, subtract the scholarship and grant amount in Box 5 from the payments reported in Box 1.
Formula:
Box 1 − Box 5 = Qualified expenses
You can then add any eligible books and supplies that were required for enrollment or attendance.
Example:
- Box 1: $3,000
- Box 5: $1,000
- Required books and supplies: $200
Qualified education expenses: $2,200
Box 5 Is Greater Than Box 1
If your scholarships and grants reported in Box 5 exceed the amount in Box 1, you generally do not have any qualified expenses available for an education credit.
Example:
- Box 1: $2,000
- Box 5: $5,000
In this situation, you would typically not qualify for an education credit because your scholarships and grants exceeded your eligible tuition payments.
If all scholarship and grant funds were used for qualified education expenses, you generally do not need to report them as income. However, if any portion was used for non-qualified expenses, such as room and board, that portion may be taxable and must be reported on your tax return.
How to Enter Taxable Scholarships and Grants
If part of your scholarship or grant is taxable, enter it in the program using these steps:
- Go to Federal
- Select Income (Select My Forms)
- Choose Less Common Income
- Select Other Compensation
- Choose Scholarships and Grants
What Counts as Qualified Education Expenses?
Generally, qualified education expenses include:
- Tuition and required enrollment fees
- Books, supplies, and equipment required for your courses
Expenses that usually do not qualify include:
- Room and board
- Transportation
- Insurance
- Medical expenses
- Personal living expenses
Keeping receipts for books and other required course materials can help ensure you receive the full education credit you're eligible for.