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Understanding Forms You Might Need for Your US Tax Return. Form 1098-T, Tuition Statement

Ines Zemelman, EASep-15-2016

There is most likely a tax form tower sitting on the desk, or probably just thrown on your kitchen counter - forms from banks, lenders, employers, stockbrokers, and many others. For some people, the forms will just be handed over to your tax preparer; for others, you will take the information from the forms and input it into your favorite tax software - perhaps even uttering a few four-letter words as you go. Regardless of how you intend to complete your taxes, you probably don’t know all the details about what the many letters, numbers, and other data printed on the forms mean. This is one of several posts that will change that, and help you start to understand the multitude of tax forms.

Form 1098-T, Tuition Statement

This form aids you in calculating education credits (as well as the deduction for tuition and associated fees) available on qualified tuition, as well as related expenses.

Your personal information, as well as the information for your university or college, is on the Form 1098-T left side. Either your full Social Security Number, or perhaps only the last couple digits, is likely to be printed there as well. Although your full Social Security Number is required for some other forms, such as the W-2, on the Form 1098-T the first few digits may be eliminated to help protect your privacy.

The Social Security Number box will have a different appearance next year. There will be a checkbox for the financial institution to certify under penalty of perjury that they have complied with new rules concerning your Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), and other numbers to identify you.

The Form in Detail

The financial information that you need is on the form’s right side.

Box 1

The university or college will enter the total of payments you made to pay qualified tuition as well as related expenses in Box 1. The amount in this box will have subtracted any refunds of payments or reimbursements for any qualified tuition as well as related expenses, but does not subtract out any grants or scholarships that are reported in the Box 5 amount. Most students will find Box 1 to be the one that is most important.

Although this will be different starting in 2016, for 2015 the amount in Boxes 1 or 2 may be different than what was actually paid during 2015. However, you are only able to claim education credits for qualified tuition as well as related expenses you actually paid during 2015 - so make sure that you check your personal records.

Course materials, fees, and tuition required for enrollment or attendance at an eligible educational institution are what are considered to be qualified tuition & related expenses. Any amounts that were paid for courses or other activities that involve games, hobbies, or sports are not considered qualified expenses (unless they are a part of the degree program and/or help you improve or acquire new job skills). Fees for student health, medical expenses, insurance, room & board, and other similar expenses are also not considered to be qualified expenses for tax purposes.

Box 2

Box 2 reports the amounts that were billed to cover qualified tuition & related expenses. Box 2 was intended to provide another reporting method to the university or college. You may find this confusing since it does not necessarily reflect the actual amount you paid, although this is the number that matters for tax credits and tax deductions. You will want to reference your own records when doing your taxes, particularly if your university or college uses this method of reporting.

Starting in 2016, Box 2 is not used and will have shading to show that it is not in use. The law was changed so that educational institutions must report only the amounts actually paid rather than the amounts billed.

Box 3

If the university or college changes the reporting method it uses (from amount paid to amount billed), you will find Box 3 has a check.

Box 4

Any adjustments that the university or college made for the previous year will be reported in Box 4. It is important to note any amount in this box because it could reduce allowable credits that were claimed in the previous year, and therefore could increase your taxes in the year you are preparing your taxes for.

Box 5

Grants and scholarships received are reported in the Box 5 amount. Depending on what the precise circumstances are, this amount may be taxable or it might not be. Generally speaking, a grant, fellowship, or scholarship is only tax free if the student is studying for a degree from an eligible institution and the student uses the money to pay for qualified expenses. If the student is not studying for a degree, then the entire amount is taxable.

Box 6

Box 6 shows any adjustments made to grants or scholarships from a previous year. An amount in this box might change the allowable deduction or credit that was claimed on a previous year’s tax return, so you may end up needing to complete an amendment to your return for the previous year.

Box 7

This box will have a check if any payments shown in Boxes 1 or 2 are for the upcoming year.

Box 8

Box 8 will have a check if the student is enrolled at least half time. A student is half time if they are enrolled for a course load of a minimum of half of the full workload that is defined by the university or college. The university or college standards must be at least as stringent as the standards of the Department of Education.

Box 9

You will find that Box 9 has a check if the student is studying at a graduate level.

The data in Boxes 8 and 9 is important since there are some tax benefits available only to students enrolled full time, or to those students enrolled in an undergraduate program a minimum of half time.

Box 10

The Box 10 amount reflects insurance contract reimbursements and refunds that were made to the student. Of course, any amount in this box might reduce the value of any credit that can be claimed.

In Summary

There are situations where you may not be sent a Form 1098-T:

  • If the tuition and expenses are paid by a billing agreement with the student’s employer or an agency like the Department of Defense or Veterans Affairs
  • If the tuition and expenses are waived or completely paid with scholarships
  • If the student is a nonresident alien (although they can ask for one)
  • If the courses do not offer academic credit (even if the student is enrolled and pursuing a degree)
  • If none of these exceptions apply, and you have not gotten your 1098-T before February 1, you should contact the school.

For information on other relevant tax forms, look for other articles in this series.

Zemelman
Ines Zemelman, EA is the founder of Taxes for Expats
She may be reached at: +1-646-397-2887