Updated October 15, 2021
Want to get up to $2,500 back on your federal tax returns? Keep the 1098-T form. 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 savings account. If you haven’t gotten one by mail or email, your student should request a copy.
What are Qualified Education Expenses?
Qualified education expenses includes 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 refers to most college, universities and vocational schools that are also eligible to participate in student aid programs through the Department of Education.
How does the 1098-T work?
Every year, tuition-paying students at these institutions are sent a 1098-T form for filing taxes with the IRS. The information about educational expenses in this form helps during tax preparation to determine if the student or parent of a dependent student, qualifies for education-related tax credits. It’s sent by January 31st. When adding expenses for tax credits, you also may be able to add required textbooks that you have receipts for that weren’t on the form.
What about scholarships and financial aid?
Boxes 4, 5 & 6 pertain to adjustments and scholarships. Box 4 shows adjustments the school has made to qualified expenses from a previous year. The amount of scholarships and grants that were paid directly to the school are in Box 5. 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.
What are boxes 7 through 9?
Boxes 7-9 are checked by the school under specific circumstances. Box 7 is checked if the amounts in Box 1 or Box 2 include expenses for an academic term beginning in the first three months of the year following the 1098-T’s information (such as a Winter or Spring Semester). The school checks Box 8 if the student is enrolled at least half-time. Graduate students have a checkmark in Box 9.
What Does Box 10 Mean?
Box 10 is checked if some or all of the student’s expenses are reimbursed due to a tuition insurance policy. Tuition insurance reimburse students who withdraw from school due to an unforeseen accident, injury or other covered reason. Tax filers deduct the amount tuition insurance reimbursed from qualified expenses.
Bottomline
Always look for potential tax benefits. The 1098-T gives a starter number for figuring out how much qualified expenses to claim. Then, add to textbooks, technology, or course materials that was required by the school or professor but not listed on the form. When in doubt on qualified expenses to claim, ask the school, an accountant, or the IRS 800 number: 1-800-829-1040.
