Tax Basics

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Why Did My School Send Me a Form 1098-T Tax Form?

January 20, 2017 : Mairye Bates

Are you a college student wondering why you’ve gotten another Internal Revenue Service (IRS) form?  If you are a student, you’ll probably get a Form 1098-T, a tuition statement sent from your college or university, right around this time of year.

Form 1098 will show you either the amount you paid for qualified education expenses (in Box 1) or the amount billed for them (in Box 2). The amounts are reported by the school to you, and to the IRS.

First, Let’s Talk About Qualified Expenses

Qualified expenses include tuition and fees at eligible institutions.  They can also include certain course materials, if required to be enrolled. However, other expenses, like room and board, transportation and similar personal costs are not qualified.  So, they will not be included on your 1098-T. Also, tuition for courses that are not taken for academic credit, or that are sports or hobby related are not usually qualified expenses.

What is an Eligible Institution?

An eligible educational institution can be a college, university, vocational school or other institution. The school must be eligible to participate in the Department of Education’s student aid programs. (View the full list of eligible institutions.)

So, What Should You Do With This Tax Form?

Well, the information on the form is required for you to file for education benefits on your tax return.  There are many education tax benefits, and some of them can be worth hundreds or even thousands of dollars. Using the information on the 1098-T Tax Form will let you calculate the benefits you (or, sometimes, your parents) can claim on your tax return.

Education Credits

Some education benefits are credits. Credits are often the best, because they reduce your tax dollar-for-dollar. The American Opportunity Tax Credit can be worth up to $2,500.  And, because it’s a refundable credit, you could get money even if you don’t owe any taxes. That’s right, the government could send you a check to help with your education expenses.  This credit only applies to undergraduate tuition and is limited to four years.

Another credit is the Lifetime Learning Credit, which works for undergraduate or graduate tuition. It’s not as much, and it’s not refundable, but it’s still a great way to reduce the tax you owe.

Education Deductions

If you’re not able to use a credit, you might be able to take the Tuition and Fees deduction.  A deduction reduces your taxable income, which can reduce your tax.  This deduction is not usually as valuable as a credit, but hey, any reduction in tax is good, right?  If you’re in the 15% tax bracket, a $1,000 deduction could save you $150.

So, What’s the Bottom Line with 1098-T Tax Forms?

A 1098-T Tax Form has valuable information that may reduce your taxes. And, a trained tax professional is a great resource to help you and/or your family figure out which education tax benefits are best for you.

For more insight into educational tax forms, head to H&R Block’s “Get Answers”.

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Mairye Bates

Mairye Bates

H&R Block

Mairye Bates is an H&R Block Master Tax Advisor, Instructor, and a Master Virtual Instructor. She is also an IRS Enrolled Agent, and has worked for H&R Block doing taxes since 2006 in San Diego, CA.

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