Information about Form 1098-T
What is a 1098-T form?
The 1098-T tax form informs the taxpayer if he/she may be eligible for the American Opportunity Credit in tax year 2012. The purpose of the 1098-T is to help you and/or your tax professional determine if you are eligible for an Education Tax Credit. The 1098-T is just informational; you are not required to attach IRS Form 1098-T to your tax return.
Who is eligible for the tax credit?
The student, if not considered a dependent for income tax purposes, may be eligible to claim the credit. If the student had tuitions and fees paid by the parents, then the parents can claim the credit providing income for the year is within IRS guidelines. If the student or the parents are married filing separate, then the American Opportunity Credit and the Lifetime Learning Credit cannot be taken.
What are the boxes on the form?
- Box “one” represents total amount payed for tuition and qualified fees during calendar year 2012.
- Box "two" is not being used this year for reporting purposes.
- Box "four" nets adjustments to the student's account. If a number is posted to box "four," then this amount should be subtracted from the amount in box "two." Items included in box "four" are the tuition and fee adjustments during the prior year. For example, if the student registered for a class in November 2011 for the spring 2012 semester. The amount would show as an adjustment on the 1098-T because the registration took place in calendar 2011. Remember to subtract box 4 from box 2.
- Box "five" reflects financial aid and scholarships made to the student during the tax year. If the student's aid exceeds tuition and fees, then the tax credit may not be taken. Remember to subtract box 5 from box 2.
- Box "six" shows adjustments for scholarships and/or grants for a term held in the prior tax year. Remember to subtract box 6 from box 2.
- Box "seven" will be marked with a "Y" if the student made a registration in tax year 2012 but the class is scheduled for calendar 2013. The registration is reflected in box "two."
- Box "eight" tells the recipient if he/she qualifies for the American Opportunity Credit. The law states that a student must be enrolled at least half time (minimum - six credit hours in one term) in a degree or certificate program. If the student qualifies, then the box will be marked with an "X."
Example: Jane Doe took six credit hours during a year at John A. Logan College. If she took a three credit course in the spring and a three credit course in the fall, she would not qualify because under the law because she would not be considered a half-time student in any one term. If Jane took six credits in the spring term, she would qualify for the Hope Scholarship Credit because under the law she would be considered a half-time student.
What form or forms do I complete?
To apply for the American Opportunity Credit, one should refer to IRS tax form 8863 and Publication 970 when completing your forms. If you are experiencing difficulty completing the form, you should consult a tax advisor.