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1098T Information

What is a 1098-T?

The 1098-T form is used by eligible educational institutions to report information about their students to the IRS as required by the Taxpayer Relief Act of 1997. Eligible educational institutions are required to submit general student enrollment information and financial data for the corresponding tax year. Information included is student name, address, social security number or tax identification number, enrollment status, academic status, amount billed for qualified tuition OR amounts paid for qualified tuition (but NOT both), scholarship or grant amounts, and, if applicable, adjustments to prior year qualified tuition and/or adjustments to prior year scholarships.

American Opportunity Tax Credit

Thanks to the American Recovery and Reinvestment Act of 2009 (ARRA), the Hope Credit has been expanded and renamed the American Opportunity Tax Credit. The American Opportunity Tax Credit is now available for the first four years a student is enrolled in post-secondary education and are carrying at least a half-time workload while pursuing an undergraduate degree, certificate, or other recognized credential.

The American Opportunity Tax Credit is available to eligible taxpayers on a per-student basis if you have qualified expenses paid in the current tax year as a student enrolled at or attending an eligible educational institution. You cannot claim credits if your filing status is married and filing separately or you are claimed as a dependent on another person's tax return (such as your parents’ return). The full amount of the American Opportunity Tax Credit is available to married taxpayers filing jointly with an adjusted gross income (AGI) of $180,000 or less and to single taxpayers with an AGI of $90,000 or less. Married taxpayers with a combined AGI of $180,000 or greater (and single taxpayers with an AGI of $90,000 or greater) are ineligible for this credit.

The amount that may be claimed as a credit is generally equal to:(1) 100 percent of the first $2,000 of the taxpayer’s out-of-pocket expenses for each student’s qualified tuition and related expenses; plus (2) 25 percent of the next $2,000 of the taxpayer’s out-of-pocket expenses for each student’s qualified tuition and related expenses. Thus, the maximum credit a taxpayer may claim for a taxable year is $2,500 multiplied by the number of students in the family who meet the eligibility requirements described above. Qualified tuition and related expenses has been expanded to now include course materials (books, supplies, equipment) whether or not they are purchased from an eligible institution as a condition of enrollment. Up to 40% of the American Opportunity Tax Credit is refundable. This means that even if you owe no taxes, you may still qualify to have a portion of the American Opportunity Tax Credit refunded.

The following are not qualified tuition and related expenses: (1) amounts paid for any course or other education involving sports, games or hobbies (unless the course or other education is part of the student's degree program); (2) charges and fees for room, board, student activities, athletics, insurance, books, equipment, transportation (and similar personal, living or family expenses). If you or the student claim a deduction for higher education expenses, such as on Schedule A or Schedule C (Form 1040), you cannot use those expenses when figuring your education credits. Also, higher education expenses paid with a tax-free scholarship, Pell Grant or employer-provided educational assistance cannot be used when figuring your education credits. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits. Nonresident aliens generally are ineligible to claim the American Opportunity Tax Credit.

If the taxpayer is claiming a Lifetime Learning Credit for a particular student, none of that student’s expenses for that year may be applied toward the American Opportunity Tax Credit.

For more information about the American Opportunity Tax Credit, call the IRS at 1-800-TAX-1040 or visit their web site at www.irs.gov.

THE LIFETIME LEARNING CREDIT

The Lifetime Learning Credit is offered to encourage people to improve or acquire new job skills. This credit applies to tuition and fees for undergraduate, graduate, and continuing-education courses. Qualified tuition and related expenses are tuition and fees a student must pay to be enrolled at or attend an eligible educational institution. The following are not qualified tuition and related expenses: (1) amounts paid for any course or other education involving sports, games or hobbies (unless the course or other education is part of the student's degree program); (2) charges and fees for room, board, student activities, athletics, insurance, books, equipment, transportation (and similar personal, living or family expenses). If you or the student claim a deduction for higher education expenses, such as on Schedule A or Schedule C (Form 1040), you cannot use those expenses when figuring your education credits. Also, higher education expenses paid with a tax-free scholarship, Pell Grant or employer-provided educational assistance cannot be used when figuring your education credits. Part-time and full-time students are eligible for the Lifetime Learning Credit. Unlike the American Opportunity Tax Credit, you are not required to be enrolled at least half-time in one of the first four years of post-secondary education. You may be eligible to receive a partial credit, even if you are taking only a single course at a community college.

You are eligible for the Lifetime Learning Credit if you have qualified expenses paid in 2012 as a student enrolled at or attending an eligible educational institution. The full amount of the Lifetime Learning Credit is available to married taxpayers filing jointly with an adjusted gross income (AGI) of $124,000 or less and to single taxpayers with an AGI of $62,000 or less. Married taxpayers with a combined AGI of $124,000 or greater and single taxpayers with an AGI of $62,000 or greater are ineligible for these credits. You cannot claim credits if your filing status is married and filing separately or you are claimed as a dependent on another person's tax return (such as your parents’ return). Taxpayers cannot use both the American Opportunity Tax Credit and Lifetime Learning Credit for the same student in a single year.

The amount that may be claimed as a credit is equal to 20 percent of the taxpayer’s first $10,000 of out-of-pocket qualified tuition and related expenses for all the students in the family. The maximum credit a taxpayer may claim for a taxable year is $2,000. These amounts are not indexed for inflation. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits. This credit may be claimed for an unlimited number of years.

The Lifetime Learning Credit is nonrefundable. If the taxpayer is claiming an American Opportunity Tax Credit for a particular student, none of that student’s expenses for that year may be applied toward the Lifetime Learning Credit.

For more information about the Lifetime Learning Credit, call the IRS at 1-800-TAX-1040 or visit their web site at www.irs.gov.

DOWNLOAD 8863, 8917 AND 1098-T TAX FORMS

Click here to Download Form 8863
To view this form, you must have Adobe Acrobat Reader. If you do not have Adobe Acrobat Reader, you may click here to download it free.

Click here to Download Instructions for Form 8863
To view this form, you must have Adobe Acrobat Reader. If you do not have Adobe Acrobat Reader, you may click here to download it free.

Click here to Download Form 8917
To view this form, you must have Adobe Acrobat Reader. If you do not have Adobe Acrobat Reader, you may click here to download it free.

THE TUITION AND FEES DEDUCTION FOR HIGHER EDUCATION EXPENSES

This tax deduction is available to tax filers whose AGI is too high to claim either the American Opportunity Tax Credit or the Lifetime Learning Tax Credit. The deduction is for qualified higher education expenses paid by the taxpayer during a taxable year. To claim a Higher Education Tuition and Fee Deduction, the eligible taxpayer should use the new IRS Form 8917. Additional information for calculating a credit or deduction can be found in IRS Publication 970, which is available at www.1098T.com or www.irs.gov. Information specific to the continuation of the higher education tuition and fees deduction is also available from the IRS.

Value: The maximum deduction in is $4,000 paid for qualified tuition and related expenses, less any non-taxable gift aid (e.g., grants and scholarships), for all eligible students in the family.

Income Limits: Single filers with an Adjusted Gross Income (AGI) between $65,000 and $80,000 and joint filers with an AGI between $130,000 and $160,000 are permitted a maximum deduction of $2,000. Filers with incomes exceeding $80,000 ($160,000 joint) are ineligible for the deduction.

Eligible Education: Any course or courses in which a student is enrolled at an eligible educational institution. The deduction cannot be claimed for the same student in the same year as the American Opportunity Tax Credit or Lifetime Learning Tax Credit.

HOW TO OBTAIN AN EDUCATION TAX CREDIT

What is IRS Tax Form 8863?

Taxpayers use IRS Form 8863 to claim American Opportunity Tax Credit and Lifetime Learning Tax Credit. It's possible that if you attend an academic institution of higher learning in the United States, you can claim up to $2,500 in educational credits per year by qualifying to receive the American Opportunity Tax or Lifetime Learning Credit. If you are a student or the parents of someone attending an eligible post-secondary educational institution, these credits could potentially save you money in educational costs. Depending upon your circumstances, the American Opportunity Tax and Lifetime Learning Credits could help reduce your academic expenses. The 8863 form acts as worksheet that was developed by the IRS so that you can list, figure and report expenses.

What is IRS Tax Form 8917?

Taxpayers use IRS Form 8917 to figure and claim the tuition and fees deduction. This deduction is based on qualified education expenses during a calendar year paid to an eligible postsecondary educational institution. It's possible that if you attend an academic institution of higher learning in the United States, you can claim up to $4,000 in educational deductions per year by qualifying to receive the tax deduction for tuition and fees. If you are a student or the parents of someone attending an eligible post-secondary educational institution, this deduction could potentially save you money in educational costs.


Frequently Asked Questions:

What is the 1098-T form, and why are there amounts on the form when there haven't been any in the past?

The 1098-T form is used by eligible educational institutions to report information about their students to the IRS as required by the Taxpayer Relief Act of 1997. Eligible educational institutions are required to submit general student enrollment information and financial data for the corresponding tax year. Information included is student name, address, social security number or tax identification number, enrollment status, academic status, amount billed for qualified tuition OR amounts paid for qualified tuition (but NOT both), scholarship or grant amounts, and, if applicable, adjustments to prior year qualified tuition and/or adjustments to prior year scholarships.

Can I receive my 1098-T form electronically instead of waiting for it to be mailed?

Yes, consent must be given electronically.  Click this link for instructions for accessing your 1098T: 1098T Process for Students via Touchnet Student Account Center (PDF)

Can my parents or taxpayer view and print my 1098-T?

Yes, if the student has setup the parent or taxpayer as an Authorized User to the student’s Account Center.  Click this link for instructions on setting up an Authorized User. Setting up Authorized Users via Touchnet Student Account Center (PDF).

Who can claim an American Opportunity Tax Credit or Lifetime Learning Tax Credit or the Higher Education Tuition and Fees Deduction?

An eligible taxpayer may claim them. An eligible taxpayer may be the student or, if the student is a dependent for federal income tax purposes, the person (e.g., parent) claiming the student as a dependent. A student who is a dependent cannot claim the tax credits or deduction on his or her own tax return.

How do I claim a credit or deduction?

To claim a hope or lifetime learning credit, the eligible taxpayer should use IRS Form 8863. The tuition and fees deduction is claimed using IRS Form 1040A or on IRS Form 1040. Taxpayers do not need to itemize deductions on Schedule A, Form 1040, in order to claim the deduction. Whether the credits or the deduction are being claimed, the taxpayer's financial records serve as the official supporting documentation for calculating the amount being claimed. Additional information for calculating a credit or deduction can be found in IRS Publication 970, which is available at www.1098-T.com or www.irs.gov.

Can I claim a tax credit and the Higher Education Tuition and Fees Deduction in the same year?

Yes, provided that they are for different students. For each year that a student meets the eligibility requirements for the credit or deduction, his or her expenses may be used as the basis for one tax credit or deduction, but no more than one. If a student pays more than $2,500 in qualified tuition and related expenses during the calendar year, the taxpayer may not claim the American Opportunity (Hope) Credit for the first $2,500 of expenses and the Lifetime Learning Credit or Higher Education Tuition and Fees Deduction for the rest of the expenses for that student.

Why aren't there amounts in both boxes 1 and 2 on the 1098-T form?

Institutions may elect to report either the aggregate amount of payments received for qualified tuition and related expenses (box 1), or the aggregate amount billed for qualified tuition and related expenses (box 2) during the calendar year with respect to individuals enrolled for any academic period.

What educational expenses are considered as qualified tuition and related expenses?

Qualified tuition and related expenses are tuition and fees required for enrollment or attendance at an eligible educational institution that were paid on or after January 1 and on or before December 31 of the tax year. Generally, they do not include books, room and board, student activities, athletics (unless the course is part of the degree program), insurance, equipment, transportation, or other similar personal, living or family expenses. However, for the American Opportunity Credit the term “qualified tuition and related expenses” has been expanded to include course materials such as books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the institution as a condition of enrollment.

Can I claim an American Opportunity Tax Credit or Lifetime Learning Tax Credit or the Higher Education Tuition and Fees Deduction in the same year that I take a qualified distribution from a Coverdell account (Education IRA) or 529 Savings Plan?

Yes, as long as the funds from the qualified distribution are not used to pay the same expenses used to calculate the education tax credit or deduction.

Can I claim an American Opportunity Tax Credit or Lifetime Learning Tax Credit or the Higher Education Tuition and Fees Deduction for qualified tuition and related expenses paid in advance of when the academic period begins?

Generally, the credit and deduction are available only for payments of qualified tuition and related expenses that cover an academic period beginning the same calendar year in which the payment was made. An exception, however, allows the taxpayer to claim a tax credit, if otherwise eligible, for payment of qualified tuition and related expenses made during the calendar year to cover an academic period that begins in January, February, or March of the following tax year. Consult a tax professional for tax return preparation advice.

I paid my qualified tuition and related expenses with student loans. Can I still claim an American Opportunity Tax Credit or Lifetime Learning Tax Credit or the Higher Education Tuition and Fees Deduction?

Yes. Loan funds should be considered in the same manner as cash payments when calculating an American Opportunity Tax Credit or the Lifetime Learning Tax Credit or the Higher Education Tuition and Fees Deduction. However, any scholarships, grants, or other non-taxable aid must be deducted from the amount of qualified tuition and related expenses paid.