Form 1098-T is reported as an Education Credit:
- Federal Section
- Deductions (Enter Myself)
- Credits
- Education Credits
Q. Who gets the 1098-T FORM?
A. Schools must make Form 1098-T available to any student who paid, in the previous tax year, "qualified educational expenses". Tuition, any fees that are required for enrollment, and course materials the student was required to buy from the school are qualified expenses. If someone else pays the expenses on behalf of the student (such as a parent), the student can still get "credit" for the expenses and therefore gets the 1098-T. Schools must send or make the form available to the student by January 31 and file a copy with the IRS by February 28. Many schools make the form available online for students (or parents) to retrieve.
Reporting qualified expenses:
Beginning in tax year 2018, schools report a student's qualified expenses based on how much the student paid during the year. The school reports the amount paid in Box 1 of the form. In tax years prior to 2018, the school could report the amount billed in Box 2 of form 1098-T. This box is now blank. Generally, if you used the amount in Box 2 in a previous year, the IRS would ask for proof that the payments were made to the school.
Adjustments and scholarships:
Box 4 of the 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 for that year. The student must amend that tax year in order to recapture that amount in Box 4.
Box 5 shows the amount of scholarships and grants that were paid directly to the school for the student's expenses. Scholarships and grants may reduce the amount of qualified expenses the student can use when calculating a deduction or credit.
- The amount that you are eligible to use to reduce your tax bill is, in most cases, simply the amounts paid for tuition and fees minus the amount of scholarships you received. You can only receive a deduction or credit for the amount of expenses that you paid out of pocket.
- If the amount in Box 5 (your scholarships) is GREATER THAN the amount in Box 1 (or Box 2, whichever is filled in on your 1098-T), then you cannot use any expenses to reduce your tax bill. You must report the excess as taxable income on your federal return. To do this within the program, please go to:
- Federal Section
- Income (Enter Myself)
- Other Income
- Other Compensation
- Scholarships and Grants (report excess here)
- The amount in box 5 is LESS THAN the amount in Box 1 (or Box 2, whichever is filled in on your 1098-T), then you can use the expenses as a deduction or credit. Subtract Box 5 from Box 1 (or Box 2). The difference is generally the amount that was paid out of pocket and that can be reported on your return. This will be reported with the program by going to:
- Federal Section
- Deductions (Enter Myself)
- Credits
- Education Credits
Box 6 shows any adjustments the school has made to scholarships and grants reported on a previous year's 1098-T. These adjustments may affect the student's tax liability for the previous year, so the student may have to file an amended return.
Other information: Schools must check Box 7 if the amount in Box 1 or 2 includes expenses for an academic term that begins in the first three months of the year following the year covered by the 1098-T. A check mark in Box 8 indicates that the student is enrolled at least half-time. A check mark in Box 9 indicates that the student is enrolled in a graduate program.
