When you have to pay your own school tuition, it’s time to sort-out your tax documents to find where you can get the greatest refunds. You might be familiar with tax documents like Form W-2, Form 1040, and Form 1099, but if you recently took out a student loan, you’ll receive IRS Form 1098-T, Tuition Statement. Your tuition statement gives you details about educational expenses and gives you the opportunity to obtain tax credits and deductions. Colleges and post-secondary educational institutions are required to send these to students each year.
If you obtain a tuition statement in the mail, you can work with the tax experts at Community Tax to take advantage of deductions and credits. We understand that tuition is expensive, but with one of our professionals by your side, you can earn money back to help build a positive financial future.
What Is a 1098-T Form?
A 1098-T form is an IRS tax form that is known as the Tuition Statement. The tuition statement is issued by the Internal Revenue Service (IRS), and contains important information about educational expenses. This form determines whether you’re eligible for certain education-related tax deductions or tax credits.
If you are a student who pays for your own education, or you’re a guardian claiming a student as a dependent, you can expect to receive Form 1098-T.
How Do I Get My 1098-T Form?
If you or your student attends a college, university, or vocational school, you should receive Form 1098-T by January 31st to help file your taxes and keep in your records. Your school is required to send you a tuition statement each year you attend.
Does a 1098-T Increase My Refund?
Yes, a 1098-T can increase your refund. Depending on your tax obligations and other credits or deductions you take, you may qualify for a refund, where you’ll get money back instead of owing money to the IRS.
Either you or your parents can use the information provided on Form 1098-T to claim tax credits, like the American Opportunity Credit and Lifetime Learning Credit, which are subtracted from your total tax bill. You can use IRS Form 8863 to claim education credits for your federal income tax return. You should include Form 8863 with your Form 1040 when you submit your return to the IRS.
You can also take deductions for qualified education expenses under the Student Loan Interest Deduction. Deductions can help reduce your tax bill, and potentially increase your refund, because they are subtracted from your taxable income. You can claim the Student Loan Interest Deduction without having to itemize your deductions.
What Information Is Included on a 1098-T Form?
The tuition statement is only one page, with a red copy that is sent to the IRS, and a black copy that is sent to the student or other recipient to keep in their records. In addition to basic identification information, the 1098-T includes ten lines that require the institution’s tax information as well as the student’s.
Here’s what you can expect to find when reviewing your 1098-T form:
- Box 1: Tuition payments billed and received.
- Box 2: No longer used, you will find that it’s greyed out.
- Box 3: No longer used, you will find that it’s greyed out.
- Box 4: Any adjustments made to the previous year’s Form 1098-T.
- Box 5: Any scholarships or grants provided to the student.
- Box 6: Any adjustments to scholarships or grants for the previous year.
- Box 7: The box is checked if any of the tuition paid during this tax year applies to the first quarter/semester of the following year.
- Box 8:The box is checked if the student is enrolled at least half-time.
- Box 9: The box is checked if the student is a graduate student.
- Box 10: Used by insurers who have issued any insurance contract refunds or reimbursements.
Qualified Educational Expenses on Form 1098-T
Qualified educational expenses include:
- Enrollment fees
- Course expenses that the student had to pay for their classes
Even if a parent or guardian paid for these expenses, the student is still able to claim credit if the expenses are in their name and they aren’t claimed as a dependent.
Schools are required to report these qualified expenses to you and to the IRS. In previous years, schools could record your qualified expenses in two different ways:
- Some schools base expenses on how much the student paid during the school year.
- Others determine expenses based on how much the school was billed.
However, for tax years 2019 and onward, school’s can only report based on how much the student paid during the school year, which will be found in Box 1.
While many of your school-related expenses are included in this category, not every expense receives a tax credit, including:
- Application fees
- Processing fees
- Money paid for courses involving extracurricular activities (unless it’s part of a degree program or job skill training)
- Room and board
- Books and other course materials
- Medical insurance
- Other personal costs
Although these expenses aren’t tax-deductible, earning money back can help offset the costs of attending school. If you’re unsure of what you can and can’t claim, reach out to Community Tax and one of our tax experts will help you decipher what can be claimed as an educational expense.
What If I Received a Scholarship In the Past Year?
If you received a scholarship from the institution to help fund your education, your scholarship is typically considered a part of your gross income. Scholarships are generally tax-free if you are pursuing a degree and the awarded amount is used to pay for tuition, required fees, and materials. Any amount that’s awarded as a stipend for living expenses like room and board is considered taxable. There are also a variety of coordination restrictions that restrict people from taking too much advantage of education tax benefits.
To learn more about whether your scholarship is taxable, contact your institution’s finance department and consult a professional from Community Tax to help maximize your tax deductions.
Do I Have to Put My 1098-T on My Tax Return?
No, you do not have to put the information from your 1098-T form on your tax return. However, if you want to claim education-related deductions or credits, you will need to use the information provided on Form 1098-T.
Keep in mind that if you are going to include this information on your federal tax return, only you or your parent (if you’re being claimed as a dependent) may claim these expenses.
What If I Didn’t Receive Form 1098-T?
There are several reasons you may not have received your 1098-T Form, including if you are a non-resident alien, your school shut down part way through the year, or your tuition and expenses were paid in full with grants and scholarships.
If you did not receive Form 1098-T from your financial institution, you can still claim education expenses on your tax return. However, you will have to provide documentation as proof of expenses.
Can Community Tax Help Me with My Tax Form 1098-T?
Yes! One of our experts can walk you through Form 1098-T to help you understand how it works, what the different values mean, and how you can use this information to your advantage.
Our licensed tax advocates have helped over 44,000 clients prepare their taxes and resolve tax issues. Whether you want to take advantage of tax deductions for your education expenses or you need to get out of tax debt, our professionals are standing by to help you reach your financial goals.
Choose Community Tax when you’re ready to take back the reins of your finances. We understand that it’s difficult to pay for tuition and fees if you’re a student, which is why we want to help you earn back as much money as possible. It’s never too early to plan for tomorrow. Start building the foundation of your financial future now with tax services from Community Tax. We can help you understand your taxes, file your taxes for you, and help you save big during tax season. Learn the ins and outs of taxes with the professionals at Community Tax.
Why Should I Choose Community Tax?
We are proud to be a Better Business Bureau “A+” rated company as well as a Department of Consumer Affairs accredited institution. Our experts are dedicated to finding simple, cost effective solutions to the tax problems of our clients. At Community Tax, the client’s needs come first. We don’t charge outrageous upfront costs and we won’t charge you before you know your options. Call us today for a free consultation at (844) 325-4360 and get started on your future today.