Tuesday, September 2, 2014

Education credits: Understand your Form 1098-T

If you’re a college student or parent of a college student, you may be eligible for an education credit. Most students receive a Form 1098-T, Tuition Statement, from their educational institution. Form 1098-T contains helpful instructions and other information you’ll need to claim education credits on your federal tax form. These credits help offset your out-of-pocket expenses for tuition and fees, books and equipment.

Your educational institution is required to file a Form 1098-T with the IRS and provide you a copy when there is a reportable transaction. A reportable transaction includes payments received, amounts billed or refunds made for tuition and related expenses. The form should also give you other information for the educational institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements, or refunds, and whether you were enrolled at least half time or were a graduate student.

In most cases, you should receive Form 1098-T from the eligible educational institution by Jan. 31. If you don’t receive it by the end of January, be sure to contact your school.

Education credits

An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit.

To claim an education credit, you must file Form 1040 or 1040A with Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). See Instructions for Student on Page 4 of Form 1098-T for more details.

To see if you qualify for a credit, and for help in calculating the amount of your credit, see Pub. 970, Tax Benefits for Education; Form 8863, Education Credits; and the Form 1040 or 1040A instructions. You can also use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits.

Don’t overlook these important credits. Find out more about education credits by visiting the Education Credits Web page on IRS.gov.

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