IRS Form 1098-T: Tuition Statement for Education Credits

Form 1098-T is the Tuition Statement; issued by colleges and universities to students (or their parents) reporting qualified tuition and related expenses. This form is generally required to claim education tax credits on Form 8863, including the American Opportunity Credit (up to $2,500) and the Lifetime Learning Credit (up to $2,000). Since 2018, institutions must report amounts actually paid (Box 1) rather than amounts billed, a change that simplified the form but introduced new complexities around scholarships and timing.

History and Origin

Form 1098-T was created in 1998, shortly after the Taxpayer Relief Act of 1997 established the Hope Scholarship Credit and the Lifetime Learning Credit. The IRS needed a way to verify that taxpayers claiming education credits were actually enrolled in eligible institutions and paying qualified expenses.

The form was always intended as an information tool rather than a definitive statement of what you can deduct. The IRS has repeatedly emphasized that the amounts on Form 1098-T may not match what you can actually claim for credit purposes, because the form reflects what the institution reported, not necessarily what qualifies under the tax code.

For the first two decades of its existence, Form 1098-T offered institutions a choice: they could report either amounts billed for qualified tuition (Box 2) or amounts received (Box 1). Most institutions chose to report amounts billed, which created a disconnect; a student could receive a 1098-T showing $20,000 in Box 2, but if they had a $15,000 scholarship and only paid $5,000 out of pocket, their eligible credit was based on the $5,000, not the $20,000.

The Protecting Americans from Tax Hikes (PATH) Act of 2015 changed this. Starting with the 2018 tax year, institutions were required to report amounts paid (Box 1) rather than amounts billed. This was intended to make the form more useful to taxpayers, though it created timing complications, if a student paid spring semester tuition in December, it would appear on the prior year's 1098-T, even though the classes did not start until the following January.

Who Files It and When

Eligible educational institutions; any accredited college, university, or vocational school eligible to participate in the Department of Education's student aid programs; must issue Form 1098-T to every enrolled student for whom a reportable transaction is made. The form is due to students by January 31 following the tax year.

You receive the form from your institution; you do not file it yourself. You use the information on the form when completing Form 8863 to claim education credits, or when calculating the tuition and fees deduction (if available).

Since 2016, having a Form 1098-T is generally required to claim an education tax credit. The IRS added this requirement to reduce fraud; previously, some taxpayers claimed credits for institutions they never attended or expenses they never paid. There are limited exceptions: if the institution is not required to issue a Form 1098-T (for example, certain non-accredited institutions or institutions where all students are nonresident aliens), you may still claim the credit if you can otherwise substantiate the expenses.

Key Sections Explained

Box 1; Payments Received for Qualified Tuition and Related Expenses

This is the total amount the institution received from you (or on your behalf) for qualified tuition and related expenses during the calendar year. "Qualified" generally means tuition and required enrollment fees; it does not include room and board, insurance, medical fees, transportation, or personal expenses.

Important: Box 1 reflects payments received by the institution, not necessarily what you paid out of pocket. Payments from 529 plans, loans, scholarships, and personal funds are all included in Box 1. To determine your credit-eligible expenses, you must subtract scholarships and grants (Box 5) and tax-free 529 distributions.

Box 4; Adjustments Made for a Prior Year

If the institution made a refund or reduction of tuition that was reported on a prior year's 1098-T, the adjustment appears here. This can happen if you dropped a class after the semester started or received a retroactive scholarship. You may need to recalculate your prior year's education credit, or, in some cases, include the adjustment as income on your current year return.

Box 5; Scholarships or Grants

The total amount of scholarships, grants, and other third-party payments processed by the institution during the calendar year. This includes academic scholarships, need-based grants, employer-provided tuition assistance processed through the school, and similar payments.

If Box 5 exceeds Box 1, the excess may be taxable income to the student. Scholarship amounts that exceed qualified education expenses (tuition and required fees for credits; tuition, fees, books, supplies, and equipment for the scholarship exclusion) are generally taxable. This catches many students and parents by surprise.

Box 6; Adjustments to Scholarships or Grants for a Prior Year

Similar to Box 4, this reflects reductions in scholarships that were reported in a prior year. If a scholarship was reported in Box 5 last year but was later revoked or reduced, the adjustment appears here. This may allow you to claim a larger credit for the current year or amend the prior year's return.

Box 7; Checkbox: Amounts for Academic Period Beginning January-March

If this box is checked, it indicates that Box 1 includes payments for an academic period beginning in the first three months of the following year. For example, if you paid spring 2025 tuition in December 2024, your 2024 Form 1098-T will include that payment in Box 1, and Box 7 will be checked. You can generally claim the credit in the year you paid, even though the academic period has not yet begun.

Box 8; At Least Half-Time Student

Checked if the student was enrolled at least half-time for at least one academic period during the year. This matters for the American Opportunity Credit, which requires at least half-time enrollment.

Common Mistakes

• Using Box 1 directly as your credit amount. Box 1 does not represent your out-of-pocket cost. You must subtract scholarships (Box 5), tax-free 529 distributions, and employer-provided education assistance to determine your actual credit-eligible expenses.
• Not recognizing taxable scholarship income. If Box 5 exceeds Box 1, the student may have taxable scholarship income. This often happens when a student receives a full scholarship that covers tuition plus room and board — the room and board portion is taxable.
• Claiming credits for room and board. Room, board, and living expenses are never qualified for education tax credits, regardless of what appears on the 1098-T. The 1098-T only reports tuition and related fees — it does not validate that those expenses qualify for a credit.
• Timing confusion with Box 7. If Box 7 is checked, it means some of the payments in Box 1 are for a term starting in the following year. You generally claim the credit in the year you paid, but this can cause confusion if you are trying to match payments to academic periods.
• Not claiming available credits because the 1098-T looks confusing. Many families leave education credits unclaimed because the form is confusing or the numbers do not seem to match their records. Review your student account statement from the institution — it often provides a clearer picture of actual payments and charges.
• Ignoring Box 4 and Box 6 adjustments. Prior-year adjustments can affect both current and prior year taxes. A large prior-year tuition refund (Box 4) may require you to include income or reduce credits, while a scholarship reduction (Box 6) may increase your eligible expenses.

Recent Changes

The shift to reporting amounts paid (Box 1) instead of amounts billed (Box 2), fully effective since 2018, continues to cause confusion. Some institutions took several years to fully implement the change, and legacy guidance that references Box 2 is still circulating online. For current filings, you should rely exclusively on Box 1.

The IRS has increased enforcement around education credit claims. The agency uses Form 1098-T data to verify credit eligibility and has sent notices to taxpayers who claimed credits without a corresponding 1098-T on file. Starting in 2016, the form requires the student's taxpayer identification number, and institutions that fail to collect it face penalties.

With the permanent enactment of the American Opportunity Credit and the alignment of income phaseout ranges for both education credits in 2021, the 1098-T has become a more straightforward tool for credit calculation — though the interaction with scholarships and 529 plans remains a source of complexity.

For more details, visit the official IRS page for Form 1098-T.

This article is educational and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.