Hi, I’m Bette Hochberger, CPA, CGMA. Today I will explain Form 1098-T and what that means for college students. Let’s go ahead and jump in!
What is Form 1098-T?
Your college or career school may be sending you (or already has sent you) a 1098-T form. Please don’t worry, because it may be a good thing. Form 1098-T is a Tuition Statement to report qualified tuition and related educational expenses to you and the IRS. So, why might receiving this form be a good thing? If you are a current student or recent graduate who has received Form 1098-T, you might be able to get added money refunded to you when doing your taxes. In short, it’s possible to claim these expenses as educated-related tax credits.
Who gets the 1098-T form, and what are the qualified expenses?
Schools must send Form 1098-T to any student who paid “qualified educational expenses” in the prior tax year. Qualified expenses include tuition, scholarships or grants, fees required for enrollment, and course materials required for a student to be enrolled. If someone else pays for these expenses on behalf of the student, such as a parent, the student will still get credit for them and receive Form 1098-T. Schools must send this form out to their students by January 31st, 2023, and file a copy with the IRS by February 28th, 2023.
Understanding Form 1098-T
The 1098-T form has been updated over the past several years. Before, Boxes 2 and 3 were used, but now they are no longer used and will be seen empty. Box 2 showed how much the school billed the student during the year, and Box 3 was provided to put a check mark if the school’s reporting method had changed. Now, looking at the form, you will see ten boxes. Let me explain a little more about what each one means.
Box 1: Payments received for qualified tuition and related expenses.
Box 2: Empty
Box 3: Empty
Box 4: Adjustments the school has made to qualified expenses for a prior year. The student may be responsible for additional tax for that year if it turns out that a previous year’s expenses were lower than initially reported.
Box 5: Scholarships or grants. These may reduce the number of qualified expenses students can use when calculating a credit.
Box 6: Adjustments to scholarships or grants for a prior year. These adjustments may affect the student’s tax liability for the previous year, so the student may have to file an amended return.
Box 7: This box is checked if the amount in Box 1 included amounts for an academic period beginning January-March 2023.
Box 8: This box is checked if the student is enrolled at least half-time.
Box 9: This box is checked if the student is enrolled in a graduate program.
Box 10: This box will only be filled in if the student had expenses reimbursed under a “tuition insurance” policy. These typically go along with instances where the student is forced to withdraw from school due to medical reasons or family emergencies. This box, if filled in, will show the amount reimbursed.
I hope you were able to learn something new today. As always, stay safe, and I will see you next time!
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