Tax Season is officially halfway through, and for students or recent graduates, the 1098-T form is an important document to keep in mind. The form is filed by eligible educational institutions. But what exactly does each section of the 1098-T mean, and how should it be interpreted by both students and institutions? Let’s dive deep into that quickly where we will break down the form and explain its sections and their significance!
Key Takeaways
- 1098-T is used for Education Tax Credits. The form helps students and families claim education-related tax credits like AOTC and LLC.
- Scholarships and grants reported in Box 5 can reduce the amount of qualified expenses eligible for tax credits.
- Institutions are required to report actual payments received, which makes it easier to track eligible expenses.
What is Form 1098-T?
Form 1098-T reports qualified tuition and related expenses paid to a college or university. It helps you or your dependents claim valuable education tax credits or deductions.
Who Issues the Form?
Eligible educational institutions, including colleges and universities, must issue Form 1098-T to students who have made qualified tuition and related expense payments.
Who Receives the Form?
Students who paid for qualified educational expenses receive this form. However, students whose tuition is fully covered by scholarships or grants may not receive one.
When is it Issued?
The form must be issued by January 31st of the following year.
Filing Type |
Due Date |
| Recipient Copy | January 31, 2025 |
|
IRS eFile |
March 31, 2025 |
Form 1098-T Filing Details (Boxes Explained)
Each box of Form 1098-T reports specific transaction totals from the calendar year.
Box 1 displays the total tuition costs and required fees that were paid during the tax year.
Box 2 is intentionally blank. Since 2018, federal regulations require that institutions report amounts paid (Box 1) versus amounts billed (Box 2).
Box 3 is no longer used.
Adjustments and Scholarships (Box 4, 5 & 6)
Box 4 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.
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 credit. Please note that grants from Higher Education Emergency Relief Funds (HEERF) are not included in Box 5 because they are not includable in your gross income according to the IRS.
Note: Box 5 does not include your assistantship salary.
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.
Box 7: 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.
Box 8: A check mark in Box 8 indicates that the student is enrolled at least half-time.
Box 9: A check mark in Box 9 indicates that the student is enrolled in a graduate program.
Box 10 comes into play only in cases in which students have had expenses reimbursed under a “tuition insurance” policy. Such policies reimburse students when they are forced to withdraw from school—for medical reasons or family emergencies, for example—after paying nonrefundable tuition.
Frequently Asked Questions
Q1. Why are the amounts in Box 1 also in Box 5? What if Box 5 is greater than Box 1?
Box 5 reflects the total scholarships, grants and fellowships that the university is aware of, excluding any that are paid directly to the student. Scholarships, grants and some sponsorships reported in this box could pay Qualified Tuition and Related Expenses reported in Box 1 but they could also pay expenses like housing and dining or insurance which are not QTRE and therefore not reported in Box 1.
Q2. Does the 1098-T include charges for books?
No, the institutions do not include amounts paid for books in Form 1098-T. Students should consult with your tax advisor to determine if payments for books, equipment or fees should be considered when preparing your income tax returns and determining eligibility for education tax credits or deductions.
Q3. What are the exceptions to not file 1098-T?
You do not have to file Form 1098-T or furnish a statement for:
- Courses for which no academic credit is offered, even if the student is otherwise enrolled in a degree program
- Nonresident alien students, unless requested by the student
- Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships
- Students for whom you do not maintain a separate financial account and whose qualified tuition and related expenses are covered by a formal billing arrangement between an institution and the student’s employer or a governmental entity, such as the Department of Veterans Affairs or the Department of Defense.
Q4. Who is an eligible educational institution?
An eligible educational institution is a college, university, vocational school, or other postsecondary educational institution that is described in section 481 of the Higher Education Act of 1965 as in effect on August 5, 1997, and that is eligible to participate in the Department of Education’s student aid programs. This includes most accredited public, nonprofit, and private postsecondary institutions.
Ready to file 1098-T Online?
