What Is IRS Form 1098-T?

If you or your dependent attended college, trade school, or another eligible educational institution, you should receive Form 1098-T from the school by January 31. It reports tuition and related expenses billed to the student's account and scholarships or grants received during the year.

What the Boxes Show

Box 1 shows the amounts actually paid toward qualified tuition and related expenses. Box 5 shows scholarships and grants the school received on the student's behalf. Box 7 indicates whether any amount in Box 1 relates to the following academic year (for example, spring semester tuition paid in the fall). Box 8 indicates whether the student was enrolled at least half-time, which affects eligibility for the American Opportunity Credit.

Billed vs. Paid

Some schools report what was billed, others report what was actually paid. Tax credits are based on what was paid. If your 1098-T shows a different amount than what you actually paid out of pocket, use your own payment records to substantiate the credit you're claiming.

Scholarships and Grants

Scholarships and grants shown in Box 5 that exceed the qualifying expenses in Box 1 may be taxable. If a scholarship covers more than tuition, fees, and required course materials, the excess is generally included in the student's gross income. This can sometimes create a surprising tax bill for students who thought all scholarship money was tax-free.

Why You Need It

To complete Form 8863 for education credits, you need the information on your 1098-T. Some tax software imports 1098-T data directly from the school if the student gives permission. Even if you import, verify the numbers against your actual payment records.

Keep It With Your Records

The 1098-T doesn't go into your return the way a W-2 does — you use the information from it to calculate the credit on Form 8863. Keep the original document with your tax records along with your tuition payment receipts.