Save the 1098-T For Tax Credits

Want to get up to $2,500 hundred dollars back on your taxes this year or by amending old returns? You’ll need the 1098-T form from the year you’ll looking to get tax credits for. It’s a receipt from your student’s school for money paid for tuition and other “qualified education expenses.  It’s similar to a […]
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Want to get up to $2,500 hundred dollars back on your taxes this year or by amending old returns? You’ll need the 1098-T form from the year you’ll looking to get tax credits for. It’s a receipt from your student’s school for money paid for tuition and other “qualified education expenses.  It’s similar to a tax form for interest paid on a student loan or interest paid on a savings account. If you haven’t gotten one by mail or email, you can always have your student request a new copy.

What are Qualified Education Expenses?

Qualified education expenses can include tuition, required fees, and required course materials. Required course materials only include technology when the classes or school specifically says the student has to have them,

Room and board, medical expenses or insurance, personal and family expenses, and transportation aren’t included on the form. Hobby and sports expenses aren’t qualified expenses either, unless it’s required to meet a degree requirement or job training.

What is considered an eligible college or post-secondary institution?

Eligible colleges or post-secondary institutions in this context refers to most college, universities and vocational schools which are also eligible to participate in student aid programs through the Department of Education.

How Does This Work?

Every year, tuition-paying students at these institutions, will be sent a 1098-T form to use when filing their taxes with the IRS. The information about educational expenses in this form is used during tax preparation to determine if the student, or parent of a dependent student, qualifies for education-related tax credits. This form must be sent to the student by January 31st and a copy must be filed with the IRS by February 28th.  You also may be able to iadd required textbooks that you have receipts for but weren’t on the form.

What About Scholarships and Financial Aid?

Boxes 4, 5 & 6 pertain to adjustments and scholarships. Box 4 will show any adjustments the school has made to qualified expenses from a previous year. Box 5 shows the amount of scholarships and grants that were paid directly to the school. This number can reduce the amount of qualified expenses for the tax year. Box 6 is a bit of both in that it shows any adjustments made on a previous year to the scholarships and grants that were reported. This could potentially cause the student to be required to file an amended return for the previous year.

What Are The Other Boxes?

Boxes 7-9 are check boxes that should be marked by the school if the following conditions are met. Box 7 will be checked if the amounts in Box 1 or Box 2 include expenses for an Academic Term beginning in the first 3 months of the year following the 1098-T’s information (such as a Winter or Spring term). Box 8 will be checked if the student is enrolled at least half-time. Box 9 will be checked if the student is enrolled in a graduate program for that year.

What Does Box 10 Mean?

Box 10 will be checked if the student had their expenses reimbursed due to a tuition insurance policy. Tuition insurance may reimburse students when they are forced to withdraw from school due to an unforeseen accident, injury or other covered reason. Since tuition insurance may reimburse the student for tuition, fees and other expenses such as room & board, this would adjust the total amount of expenses the student was responsible for paying during that academic year.

Bottomline: Always look for potential tax benefits. Handy forms like the 1098-T will help you figure out how much in qualified expenses to claim. However, you may be able to add to it with textbooks, technology, or course materials that was required by the school or professor but not listed on the form.