Form 1098-T reduces your federal income tax by letting you claim education expenses you paid during the year

The Form 1098-T reports may have access to education expenses — tuition, fees, and course materials — that you or a dependent paid to a school. The IRS uses this form to calculate two tax credits: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits subtract directly from the tax you owe, dollar for dollar, rather than reducing your income. A $1,000 credit means you pay $1,000 less in federal tax.

The school sends Form 1098-T to you and the IRS if you paid at least $600 in may have access to expenses during the tax year. You then report the information on your tax return to claim one of the two credits. Not every education expense qualifies — room and board, books you bought outside the school, and student loan interest do not appear on the form, though some may be deductible separately.

The credit you claim depends on your income, the amount of expenses, and whether you want to maximize the benefit in one year or spread it across multiple years. The form itself does not calculate your credit; it straightforward reports what you paid so you can decide which credit works better for your situation.

Key Takeaways

  • Form 1098-T reports may have access to education expenses and allows you to claim a tax credit that reduces your federal tax bill directly.
  • The American Opportunity Tax Credit covers up to $2,500 per student per year for the first four years of college; the Lifetime Learning Credit covers up to $2,000 per tax return for any level of education.
  • You can claim a credit only if you paid the expenses yourself or claimed the student as a dependent; if your parents paid and claimed you as a dependent, they claim the credit, not you.
  • The school reports only expenses it considers may have access to; you must verify that amounts on the form match what you actually paid and that the school did not include non-may have access to expenses.
  • If your income exceeds the limit for the credit you want to claim, you may not be able to use the full credit in that year, though some unused credit can carry forward.

Who receives Form 1098-T and when

The school where you or your dependent studied sends Form 1098-T to you by January 31 of the year after you paid the expenses. You receive it only if the school received at least $600 in may have access to education expenses from you during the tax year. If you paid less than $600, the school does not send the form, but you may still be able to claim a credit if you have other documentation of what you paid.

The form goes to the student's name and address on file at the school, even if a parent paid the bill. If you are claimed as a dependent on your parents' tax return, your parents should receive a copy or ask the school to send one to them, because they — not you — claim the credit on their return. Schools sometimes mail the form to the wrong address or send it late; if you do not receive it by early February, contact the school's financial aid office and ask them to reissue it or provide a written statement of what you paid.

The American Opportunity Tax Credit versus the Lifetime Learning Credit

The American Opportunity Tax Credit is worth up to $2,500 per student per tax year and covers tuition, fees, and course materials for the first four years of college or university. You can claim it for multiple students in the same year if you have more than one in school. Up to $1,000 of the credit is refundable, meaning if your tax bill is zero or very small, the IRS may send you the difference as a refund. This credit phases out if your income exceeds $80,000 (single) or $160,000 (married filing jointly) in 2024; the phase-out range is $10,000 for single filers and $20,000 for married filers.

The Lifetime Learning Credit is worth up to $2,000 per tax return (not per student) and covers tuition and fees for any year of college, graduate school, or courses to improve job skills. You cannot claim it for the same student in the same year as the American Opportunity Credit. The credit is not refundable, so it can only reduce your tax bill to zero; any unused portion does not come back to you. This credit phases out at the same income thresholds as the American Opportunity Credit.

You choose which credit to claim based on your situation. If you are in your first or second year of college and your income is below the phase-out range, the American Opportunity Credit usually gives a larger benefit because of the refundable portion. If you are in graduate school, taking courses part-time, or your income is high, the Lifetime Learning Credit may be your only option or the better choice.

How expenses on Form 1098-T are counted

Form 1098-T reports two boxes of expenses: Box 1 shows may have access to tuition and fees you paid, and Box 2 shows scholarships or grants the school applied to your account. The school calculates Box 1 by taking the total may have access to expenses you owed, subtracting any scholarships or grants, and reporting what remains. This means if you received a $5,000 scholarship and owed $8,000 in tuition, Box 1 shows $3,000 — the amount you actually paid out of pocket.

may have access to expenses include tuition and mandatory fees required to attend. They do not include room and board, transportation, insurance, or books and supplies you bought from outside vendors, even if the school required them. Some schools include course materials in their tuition bill; others list them separately. If you are unsure whether an expense on your bill qualifies, ask the school's financial aid office before you file your return.

You should compare the amounts on Form 1098-T to your own records — your bill, receipts, and what you actually paid. Schools sometimes make errors, such as including non-may have access to expenses or reporting the wrong year. If the form does not match what you paid, contact the school and ask for a corrected form (Form 1098-T with a "corrected" indicator) before you file your return.

Income limits and phase-outs that reduce your credit

Both the American Opportunity Tax Credit and the Lifetime Learning Credit begin to phase out at $80,000 of modified adjusted gross income (MAGI) for single filers and $160,000 for married couples filing jointly in 2024. The phase-out range is $10,000 for single filers and $20,000 for married filers, meaning the credit decreases by 25 percent for every $2,500 (or fraction thereof) of income above the threshold.

If your MAGI is $85,000 as a single filer, you are $5,000 over the $80,000 threshold. That $5,000 falls into two $2,500 increments, so your credit is reduced by 50 percent. If you would have claimed a $2,500 American Opportunity Credit, you can now claim only $1,250. If your income exceeds the top of the phase-out range — $90,000 for single filers — you cannot claim either credit that year.

MAGI for education credits is your adjusted gross income (AGI) plus certain deductions the IRS adds back. For most people, MAGI is the same as AGI. If you are unsure of your MAGI, calculate your AGI first and check the IRS instructions for Form 8863 (the form you use to claim education credits) to see if any add-backs explore to you.

What happens if you cannot use the full credit

If your income is too high to claim the full credit, or if your tax bill is smaller than the credit you calculated, you may have unused credit left over. The American Opportunity Tax Credit cannot be carried forward to future years; any unused portion is lost. The Lifetime Learning Credit also cannot be carried forward. This means if you have $2,500 in may have access to expenses but your income phases out your credit to $1,500, you lose the $1,000 difference.

One strategy is to time when you claim the credit. If you are close to the phase-out threshold, you might claim the credit in a year when your income is lower — for example, if you took unpaid leave or had a lower-income year. You can also split expenses across multiple years if the school allows it, though this works only if you have control over when you pay.

If you are claimed as a dependent on your parents' return, your parents claim the credit, not you. If their income is too high, they cannot claim it, and you cannot claim it yourself in a later year when you are independent. This is one reason some families coordinate who claims the student as a dependent based on income and education expenses.

Reporting the credit on your tax return

To claim an education credit, you file Form 8863 (Education Credits) along with your Form 1040. You enter information from Form 1098-T into Form 8863, which calculates which credit you can claim and how much. The form walks you through the income phase-out calculation and tells you the final credit amount to report on your return.

If you use tax software, the software usually imports information from Form 1098-T automatically if you enter your school's name and the form's details. You then answer questions about your income and filing status, and the software calculates your credit. If you file by hand, you must complete Form 8863 yourself and attach it to your return.

You do not have to claim a credit in the year you paid the expenses. If your income is high in one year and lower in the next, you might wait to claim the credit in the lower-income year. However, you can claim the credit only once per student per year, and you cannot claim both the American Opportunity and Lifetime Learning credits for the same student in the same year.

Frequently Asked Questions

Can I claim a credit if I did not receive Form 1098-T?

Yes. The form is required only if you paid at least $600 in may have access to expenses, but you can claim a credit for smaller amounts if you have documentation. Keep receipts, bills, and proof of payment. You can also contact the school and ask for a written statement of what you paid if the form was not sent.

What if my parents paid my tuition but I am claimed as a dependent?

Your parents claim the credit on their return, not you. The credit belongs to whoever paid the expenses and claimed you as a dependent. If you paid part of the expenses yourself, your parents can claim a credit for their portion, and you might be able to claim one for yours if you are not claimed as a dependent.

Can I claim both the American Opportunity and Lifetime Learning credits in the same year?

No. You can claim only one credit per student per tax year. If you have multiple students in school, you can claim the American Opportunity Credit for one and the Lifetime Learning Credit for another, but not both for the same person in the same year.

What if Form 1098-T shows expenses I did not actually pay?

Contact the school's financial aid office and ask for a corrected form. Do not file your return with incorrect information. The school may have included non-may have access to expenses, applied scholarships incorrectly, or reported the wrong year. A corrected form takes a few days to a few weeks to receive.

Do I lose my credit if my income is too high?

The credit phases out gradually as your income rises above the threshold, and you lose it entirely if your income exceeds the top of the phase-out range. For 2024, single filers lose the credit completely at $90,000 MAGI, and married filers at $180,000. If you are close to the limit, claiming the credit in a lower-income year may allow you to use more of it.