The 1098-T reduces your taxable income by letting you claim education expenses

The 1098-T is a form your school sends you when you pay for tuition, fees, books, or supplies. It does not give you money back directly. Instead, it lets you subtract those education costs from your income before calculating what you owe in federal income tax. The IRS calls this a tax credit — it shrinks your tax bill dollar-for-dollar, which is more valuable than a deduction that only shrinks your taxable income.

The form itself reports what you paid in the calendar year. You then decide whether to use those expenses to lower your taxes. Not every education expense qualifies, and not every student can use the 1098-T. The two main credits are the American Opportunity Tax Credit (up to $2,500 per year) and the Lifetime Learning Credit (up to $2,000 per year), but you can only claim one per student per tax year.

The 1098-T arrives by mail or email in January or February, covering the previous calendar year. Your school is required to send it if you paid at least $600 in may have access to education expenses during that year. You will need the information on this form when you file your tax return.

Key Takeaways

  • The 1098-T reports education expenses your school received from you, and you use it to claim a tax credit that reduces your federal tax bill.
  • may have access to expenses include tuition and fees, but not room and board, transportation, or personal expenses, even if your school bills you for them.
  • You can claim either the American Opportunity Credit (up to $2,500) or the Lifetime Learning Credit (up to $2,000) per student per year, not both.
  • Your income level and whether someone else claims you as a dependent affect whether you can use the credit at all.
  • If you paid expenses but did not receive a 1098-T, you can still claim the credit using your own records of what you paid.

What counts as a may have access to education expense on the 1098-T

The 1098-T only reports certain costs. may have access to expenses are tuition and required fees that your school charges to enroll or attend. This includes mandatory course fees, lab fees, and technology fees that the school requires of all students in your program. It does not include optional fees or fees for services you did not use.

Books, supplies, and equipment count only if your school requires you to buy them from the school itself or if you bought them elsewhere but the school required them for your course. If you bought a textbook on your own because the course needed it, that counts. If you bought a laptop because you wanted one, it does not, even if you used it for school.

Room and board never count, even if you lived on campus and the school billed you for housing. Transportation, insurance, and personal expenses do not count either. Some schools include these costs in the 1098-T by mistake — if you see them listed, you should not claim them as may have access to expenses when you file.

How the American Opportunity Credit works with your 1098-T

The American Opportunity Tax Credit is worth up to $2,500 per student per year. It covers the first $2,000 of may have access to expenses and 25 percent of the next $2,000, which is why the maximum is $2,500. You can claim it for four tax years per student, as long as the student is in their first four years of post-secondary education.

To use this credit, you must have a valid Social Security number, be a U.S. citizen or resident alien, and not be claimed as a dependent on someone else's tax return. Your modified adjusted gross income (MAGI) also matters — the credit phases out if your income is above a certain level. For 2023, the phase-out begins at $80,000 for single filers and $160,000 for married couples filing jointly, but these numbers change each year.

The American Opportunity Credit is partly refundable, meaning if the credit is larger than the tax you owe, the IRS will send you up to 40 percent of the unused credit as a refund. This makes it more valuable than the Lifetime Learning Credit for many students.

How the Lifetime Learning Credit works with your 1098-T

The Lifetime Learning Credit is worth up to $2,000 per tax return (not per student). It covers 20 percent of the first $10,000 in may have access to expenses. You can claim it for any year, for any number of students, and for any level of education — undergraduate, graduate, or even professional development courses.

The income limits are the same as the American Opportunity Credit: the credit phases out starting at $80,000 for single filers and $160,000 for married couples filing jointly in 2023. You cannot claim both credits for the same student in the same year, but you can claim the American Opportunity Credit for one child and the Lifetime Learning Credit for another in the same year.

Unlike the American Opportunity Credit, the Lifetime Learning Credit is not refundable. This means it can only reduce your tax bill to zero — any unused credit is lost. If you owe $1,200 in taxes and your Lifetime Learning Credit is $2,000, you get a $1,200 reduction and lose the other $800.

When you cannot use the 1098-T credit

If someone else claims you as a dependent on their tax return, you cannot claim an education credit yourself. This is true even if you paid the expenses with your own money. Your parent or guardian would need to claim the credit instead, using your 1098-T information.

Your income also matters. If your modified adjusted gross income is above the phase-out range, you cannot claim either credit. For 2023, single filers lose the credit entirely at $95,000 MAGI, and married couples filing jointly lose it at $190,000 MAGI. These thresholds change each year.

You also cannot claim a credit for expenses that were paid with tax-information programs, such as a scholarship, grant, or employer tuition information. If your school gave you a $3,000 scholarship and you paid $4,000 in tuition, you can only claim the $1,000 you paid out of your own pocket. The 1098-T will show the full $4,000, so you have to adjust it yourself when you file.

How to report the 1098-T on your tax return

When you file your federal tax return, you will enter the information from your 1098-T into the education credits section. If you use tax software, it will ask you questions about your education expenses and walk you through which credit you can claim. If you file by paper, you will use Form 8863 (Education Credits) to calculate your credit and then transfer the result to your main return.

You do not send the 1098-T itself to the IRS — they receive a copy directly from your school. You keep your copy for your records. However, you do need to report the information accurately on your return, and you should keep receipts or other proof of what you paid in case the IRS asks questions later.

If you paid education expenses but did not receive a 1098-T (for example, because you paid less than $600 or attended a school that does not issue them), you can still claim the credit. You will need to gather your own records — receipts, tuition bills, or statements from your school — to show what you paid.

What happens if the 1098-T has an error

Schools sometimes report incorrect amounts on the 1098-T. Common mistakes include listing expenses you did not actually pay, including non-may have access to expenses like room and board, or reporting the wrong student name or Social Security number. If you spot an error, contact your school's financial aid or bursar office and ask them to issue a corrected form.

Schools must send corrected 1098-T forms (marked as corrections) by the same important date as the original form. If you have already filed your return and then discover an error on the 1098-T, you can file an amended return using Form 1040-X to claim the correct credit amount.

Do not ignore errors hoping they will not matter. The IRS matches the 1098-T information they receive from your school against what you report on your return. If the numbers do not match and you claimed a credit you were not may have access to to, the IRS will send you a notice asking for the money back, plus interest and possibly penalties.

Frequently Asked Questions

Can I claim the education credit if my parents paid my tuition?

Only if your parents claim you as a dependent. In that case, your parents would claim the credit on their return using your 1098-T information, not you. If you are not claimed as a dependent, you can claim the credit even if your parents paid the expenses, as long as you meet the income limits.

What if I received a scholarship that covered part of my tuition?

You can only claim a credit for the expenses you paid yourself, not the part covered by the scholarship or grant. If your tuition was $5,000 and a scholarship paid $2,000, you can claim a credit based on the $3,000 you paid. Subtract the scholarship amount from the may have access to expenses before calculating your credit.

Do I have to choose the same credit every year?

No. You can claim the American Opportunity Credit one year and the Lifetime Learning Credit another year for the same student. However, you can only claim one credit per student per tax year. Choose whichever gives you the larger benefit based on your income and expenses that year.

What if my school did not send me a 1098-T?

Contact your school and ask why. If you paid at least $600 in may have access to expenses, they are required to send one. If they made a mistake, they will issue a corrected form. If you paid less than $600 or attended a school that does not issue 1098-Ts, you can still claim the credit using your own records of tuition bills and receipts.

Can I claim a credit for student loan interest?

No. The Student Loan Interest Deduction is separate from the education credits. You can deduct up to $2,500 in student loan interest you paid during the year, but this is a deduction, not a credit, and it uses a different form (Form 1040). You can claim both the education credit and the student loan interest deduction in the same year.