Understanding Form 1098-T
Form 1098-T is an Internal Revenue Service form that is entitled “Tuition Statement.” It is used by the IRS to determine whether an individual can claim any tax credits relating to education. These can include the Lifetime Learning Tax Credit along with the American Opportunity Credit.
From 1098-T is used by any eligible educational institution, such as a university or college, in order to report information about the students the Internal Revenue Service.
This is required under the Taxpayer Relief Act of 1997, which states that these educational institutions have to file informational returns that show the student’s enrollment, academic status, name, address, and tax payer identification number.
As of 2003, these institutions must also provide the amounts relating to tuition and related expenses along with other grants and scholarships that may have been awarded. The purpose of this is to potentially alert students other federal income tax credits related to education that the student may be eligible for.
If a student receives Form 1098-T, it means in the previous calendar year, he or she was billed for qualified tuition or other educational related expenses. These amounts are determined by a taxpayer’s records.
For Form 1098-T, qualified tuition and other related expenses include:
• Undergraduate and Graduate tuition
• Assessment fees
• Student fees
They do not include:
• Application fees
• Resident hall charges
• Diploma fees
• Transcript fees
• Text books charges at official college/university bookstore
Form 1098-T must be filed for each student enrolled in an eligible institution. These institutions include vocational schools, universities, colleges, or other postsecondary institutions as described in the Higher Education Act of 1965 Section 481. Furthermore they must be eligible for the student aid programs from the Department of Education.
However, Form 1098-T does not have to be filed if:
• Student is a nonresident alien (although it can be requested by the student)
• Classes do not have any academic credit, even if student is enrolled in a degree program
• Students have grants or scholarship that waive qualified tuition and expenses
• Student does not maintain separate financial account and has a formal billing arrangement between government entity or student employer and the institution
Form 1098-T can be received both electronically by educational institutions. In order to fill out Form 1098-T, it will require the following information:
• Payments received and amounts billed for qualified tuition and other related expenses
• Adjustments made in the previous calendar year
• Grants or scholarships administered and processed
• Adjustments to grants and scholarships
• Amount during the academic period
• Status as a half-time student or a graduate student
• Insurance contract refunds or reimbursement