Federal Tax Credits for College
During January each year the US post office delivers tax forms to parents of students in college. The form 1098-T,Tuition Statement is used to help figure education credits for qualified tuition and related expenses paid during the tax year.
Using this tax form properly on your tax return or your college students tax return will increase your refund and the IRS will help pay for a portion of college costs.
The Lifetime Learning Credit offers up to a $2,000 tax credit for qualified education expenses paid for an eligible student. The amount of the credit is figured by calculating 20% of the first $10,000 of qualified education expenses – up to a maximum of $2,000 per taxpayer.
You can claim the $2,500 American Opportunity Credit for each qualifying student on your federal income tax return. Unlike the American Opportunity Credit, the Lifetime Learning Credit is not refundable which means that if your credit exceeds your tax, you won’t receive a refund of the difference. Forty percent of the American Opportunity Credit may be refundable which means that if the refundable portion of your credit is more than your tax, the excess (up to $1,000) will be refunded to you – even if you owe zero tax.
Compare the American Opportunity Credit and the Lifetime Learning Credit to see what works best for you. It's an either/or: there's no double-dipping.
Your identifying information and the identifying information of your college or university are reported on the left side of the form. Your Social Security Number may also be on the form - or just the last few digits. The first digits of the number may be redacted for your privacy. The address should be your permanent address which might not be your school address.
Box 1 - your college or university will report the total amount of payments paid by you for qualified tuition and related expenses. This amount will be less any reimbursements or refunds for payments received for qualified tuition and related expenses during the same calendar year. This amount will not be reduced by scholarships and grants reported in box 5. For most students, this is the box that matters the most. Qualified tuition and related expenses are tuition, fees, and course materials required for a student to be enrolled at or attend an eligible educational institution. Amounts paid for any course or other education involving sports, games, or hobbies (unless part of your degree program or taken to acquire or improve job skills) and fees for room, board, insurance, medical expenses (including student health fees), transportation, and similar personal, living, or family expenses are not considered qualified tuition and related expenses.
Box 2 is used to report amounts billed to you for qualified tuition and related expenses. This is an alternate method of reporting for your college or university. This reporting method can be confusing because it may not actually reflect what you paid which is what you care about for credits and deductions. You'll want to have a calendar year payment and charges transcript from your university when preparing your return - especially if your college or university uses the billed method.
Box 3 - your college or university may change its reporting method (from paid to billed) during the year. If this happens, box 3 will be checked.
Box 4 - your college or university will report any adjustments made during the prior year. Pay attention to this box since it may reduce any allowable education credit that you claimed for the prior year and could result in an increase in tax liability for the year of the refund.
Box 5 - scholarships or grants received during the year are reported in box 5. Those scholarships or grants may or may not be taxable to you, depending on the specific circumstances. Typically a scholarship, fellowship or grant is tax free only if you are pursuing a degree at an eligible educational institution and you use the scholarship or fellowship to pay qualified education expenses. If you are not pursuing a degree, the full amount is subject to tax. The amount of scholarships or grants reduce the net tuition and expenses you can use for obtaining a tax credit. A tax tip is to consider electing to apply the scholarships or grants to room and board which makes them reportable income but allows the net tuition and expenses to be maximized for purposes of the tax credit calculation.
Box 6 - Any adjustments to scholarships and grants from a prior year are reported in box 6. Since this amount may affect the amount of any allowable tuition and fees deduction or education credit that you claimed in a prior year, you might have to file an amended return for that year.
Box 7 - If any of the payments in box 1 or box 2 are payments for the next year then box 7 will be checked.
Box 8 - If you are at least a half student then box 8 will be checked; a half-time student is a student enrolled for at least half the full-time academic workload as defined by your college or university (the standards must equal or exceed the standards established by the Department of Education under the Higher Education Act). This box must be checked or the tuition and expenses are ineligible for the American Opportunity tax credit (AOTC). A check in this box allows the IRS to know these are ineligible AOTC expenses
Box 9 - If you are a graduate student the box 9 will be checked. The American Opportunity tax credit (AOTC) is not allowed for tuition and expenses incurred as a graduate student. A check in this box allows the IRS to know these are ineligible AOTC expenses
Box 10 - an insurer will report any insurance contract refunds or reimbursements made to you as a student during the year. As you might expect, any reimbursements or refunds may reduce the amount of any education credit you can claim.
You might not receive a form 1098-T if you are taking courses for which no academic credit is offered (even if you're otherwise enrolled in a degree program); if you are a nonresident alien student; or if your qualified tuition and related expenses are entirely waived or paid entirely with scholarships.
Many Universities provide electronic portals to obtain your 1098-T for current or prior tax years. Questions and answers about Penn State University’s process is listed below.
When do I receive my Form 1098-T from Penn State University?
Penn State releases 1098-T forms to students by January 31st, as federally required.
How will I receive my Form 1098-T?
Students will receive the Form 1098-T by electronic delivery or mail. As a current student, you can have immediate access to your 1098-T form online by logging into your Student Center in LionPATH and selecting “Manage Account/Make Payment”. This will direct you to your account dashboard where you can opt-in to receive the electronic version of the form under the 1098-T section located at the bottom right-hand corner of the page. If electronic delivery is not selected, then a paper copy will be mailed to your address on file with the university. To verify or update your address, please do so by logging into your Student Center in LionPATH.
I am a former student and no longer have access to my Student Center in LionPATH. How will I receive my Form 1098-T?
If you are a former student and you no longer have access to LionPATH, please submit a request through the "Contact" option on our website, and select the category "1098-T request former student -no access to LionPATH".
I am an International Student; will I receive my Form 1098-T?
Penn State will issue a 1098-T for international students who request it. Please submit a request through the “Contact” option on our website, and select the category "1098-T international student request".
Where do I find my Form 1098-T for previous years?
1098-T forms for 2016 and beyond will be available electronically through LionPATH. 1098-T forms for 2015 and prior years will not be available through LionPATH. To request a copy of a 1098-T form that is not available in LionPATH, you may submit a request through the “Contact” option on our website, and select the category "1098-T request former student -no access to LionPATH".
What information is reported on the Form 1098-T?
Box 1. As required by the Internal Revenue Service (IRS), Penn State reports payments received for qualified tuition and related expenses for the tax year ending December 31, 2018.
Box 2. Is intentionally left blank.
Please Note: IRS tax form instructions provide that education credits and deductions for a taxpayer's 2018 individual tax return are based upon qualified educational expenses paid during the 2018 calendar year.
Box 3. Shows that your educational institution changed its reporting method for 2018. Penn State is changing its method of reporting (payments received instead of amounts billed) for 2018. You should be aware of this change in figuring your education credits.
Box 4. Shows any adjustment made for a prior year for qualified tuition and related expenses that were reported on a prior year Form 1098-T. This amount may reduce any allowable education credit that you claimed for the prior year (may result in an increase in tax liability for the year of the refund). See "recapture" in the index to Pub. 970 to report a reduction in your education credit or tuition and fees deduction.
Box 5. Shows the total of all scholarships or grants administered and processed by the eligible educational institution. The amount of scholarships or grants for the calendar year (including those not reported by the institution) may reduce the amount of the education credit you claim for the year.
Box 6. Shows adjustments to scholarships or grants for a prior year. This amount may affect the amount of any allowable tuition and fees deduction or education credit that you claimed for the prior year. You may have to file an amended income tax return (Form 1040X) for the prior year.
Box 7. Shows whether the amount in box 1 includes amounts for an academic period beginning January-March 2018. See Pub. 970 for how to report these amounts.
Box 8. Shows whether you are considered to be carrying at least one-half the normal full-time workload for your course of study at the reporting institution.
Box 9. Shows whether you are considered to be enrolled in a program leading to a graduate degree, graduate-level certificate, or other recognized graduate-level educational credential.
Box 10. Shows the total amount of reimbursements or refunds of qualified tuition and related expenses made by an insurer. The amount of reimbursements or refunds for the calendar year may reduce the amount of any education credit you can claim for the year (may result in an increase in tax liability for the year of the refund).
Why is my post 9/11 GI Bill® reported in Box 5 of the 1098-T?
Veteran's educational benefits are not taxable. However, they can be reported as a grant on Box 5 of the Form 1098-T. Reporting veteran benefits on the Form 1098-T does not indicate that such benefits are taxable. Instead, it only indicates that the individual's qualified educational expenses used for purposes of determining the tax credit must be reduced.
Whom do I contact if I have questions regarding my eligibility to receive the American Opportunity Tax Credit, the Lifetime Learning Tax Credit, or the Tax Deduction for Higher Education Expenses?
Penn State cannot provide individual tax advice and shall not be liable for damages of any kind in connection with this information. Accordingly, you should consult your tax advisor about your specific circumstances.