The 1098-T tuition statement, box by box

A 1098-T is the tuition statement your school files with the IRS and sends to the student. It records what the school received and what aid it administered, and neither of those is the number an education credit is actually figured on.

What each box reports

The top of the form carries the school's name, address and employer identification number, with the student's name and taxpayer identification number underneath. The numbered boxes are short:

• Box 1 — payments the school received during the calendar year for qualified tuition and related expenses.
• Box 4 — an adjustment to an amount the school reported in box 1 for a prior year.
• Box 5 — scholarships and grants the school administered and processed during the year.
• Box 6 — an adjustment to scholarships or grants reported for a prior year.
• Box 7 — a checkbox saying box 1 includes amounts for an academic period beginning in January, February or March of the following year.
• Box 8 — a checkbox saying the student carried at least half the normal full-time workload.
• Box 9 — a checkbox saying the student was enrolled in a graduate program.

Boxes 2 and 3 are no longer in use. Schools once had the option of reporting amounts billed rather than payments received, and that option is gone.

Box 8 and box 9 are not decoration. Half-time enrollment is a condition for one of the two education credits, and graduate study rules that same credit out, so those two checkboxes decide which credit is even on the table.

Box 1 against box 5

Box 1 is money the school took in. Box 5 is aid the school applied. Reading box 1 on its own is where most education-credit errors begin, because the two boxes describe the same tuition from opposite directions, and it is the difference between them that matters.

A student whose box 5 sits close to box 1 may have very little left to claim, however large box 1 looks. Both boxes are drawn on a calendar year: box 1 counts what the school received between January and December, whoever sent it — you, a parent, a lender or a savings plan — and box 5 counts aid posted in the same window, even when it pays for a term that starts in the spring.

Adjusted qualified education expenses

The figure a credit is built on is adjusted qualified education expenses: qualified tuition and required fees actually paid, reduced by the tax-free scholarships, grants and employer assistance that covered them. That subtraction happens on Form 8863, from your own records, with the 1098-T as corroboration rather than as the source.

Box 1 can understate the total as easily as box 5 can wipe it out. Books, supplies and equipment required for a course count for the American opportunity credit whether or not they were bought from the school, and the school never sees those receipts. Room and board, transportation, insurance, medical fees and any course-related cost that is not required for enrollment never count for either credit.

Boxes 4 and 6 point backwards rather than forwards. An adjustment in either one means a prior year may need looking at, because tuition refunded or aid granted after the fact can reduce a credit already taken.

What Form 8863 needs from the form

Form 8863 asks for each student's school by name and address, and for that school's employer identification number, which is printed on the 1098-T. A return claiming the American opportunity credit without it can be held up. The form also asks whether the school issued a 1098-T at all and whether box 7 was checked, so the statement belongs in the file with the return rather than in a drawer.

Which credits the form feeds

Two credits are figured from these numbers: the American opportunity credit, worth up to $2,500 per student per year, and the lifetime learning credit, worth at most $2,000 per return. Which one a given student qualifies for, what each of them counts, the income limits that switch them off and whose return the credit belongs on are covered in AOTC or Lifetime Learning: which education credit.

If the form is wrong, or never came

Not every student gets one. A school does not have to issue a 1098-T when qualified expenses were covered entirely by scholarships or by a formal billing arrangement, and generally does not issue one to a nonresident alien student who has not asked for it. A missing form does not by itself rule out a credit, but the expenses still have to be substantiated from your own records.

If the form arrived with the wrong name, the wrong taxpayer identification number, or amounts that do not match what was paid, ask the school for a corrected one rather than adjusting the numbers yourself. A taxpayer identification number on the 1098-T that does not match the return is a routine cause of a rejected e-file.