Tax Forms & Schedules
Form 1098-T Explained: The Tuition Statement
Form 1098-T is the tuition statement your college or university files with the IRS and sends to you by January 31, reporting what you paid for qualified tuition (Box 1) and what scholarships or grants you received (Box 5). Those two numbers drive whether you can claim an education tax credit, and how much. Box 1 minus Box 5 is your starting point for the credit math, not the finish line.
Eligible educational institutions file one 1098-T per enrolled student with a reportable transaction. You use it to complete Form 8863 and claim the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) on your Form 1040. The form itself is informational: the school does not calculate your credit, and the boxes often need adjustment before they map to what you actually spent.
What Form 1098-T reports and who sends it
Form 1098-T is filed by an eligible educational institution (a college, university, or vocational school eligible for federal student aid) for each student with a reportable transaction during the calendar year. Schools furnish it to students by January 31 and file with the IRS by late February (paper) or March 31 (electronic). Insurers also use it to report tuition reimbursements or refunds.
You may not receive a 1098-T in a few situations. Schools are not required to file if qualified expenses were fully covered by scholarships or by an employer, if you are a nonresident alien (unless requested), or if you took only non-credit courses. Missing a 1098-T does not by itself disqualify you from a credit if you can substantiate payments another way.
Box 1 (payments) vs Box 5 (scholarships): the two numbers that matter
Box 1 reports total payments received for qualified tuition and related expenses during the calendar year, from all sources, not reduced by scholarships. Box 5 reports the total scholarships and grants the school administered for the student. The gap between them is the intuitive starting point for a credit, but the raw figures often need adjusting before they are usable.
Schools report Box 1 on a payments-received basis, capped at the amount of qualified expenses billed. That means Box 1 can differ from what you actually paid: it excludes amounts above billed qualified charges, and it can straddle calendar years because tuition for a January-through-March term is often billed and paid the prior December.
Box 5 matters for two reasons. First, tax-free scholarships reduce the expenses available for a credit. Second, any scholarship or grant that exceeds qualified tuition and related expenses, or that is designated for room and board, is generally taxable income to the student and may need to be reported on Form 1040. A large Box 5 relative to Box 1 is a flag to check for taxable aid.
How the boxes feed the AOTC and LLC on Form 8863
You do not enter 1098-T amounts directly onto Form 8863. Instead, you calculate your adjusted qualified education expenses: start with what you paid for qualified tuition and required fees, add credit-eligible items (books and supplies for the AOTC), then subtract tax-free scholarships, grants, and other tax-free assistance. That net figure flows to Form 8863, which computes the credit and carries it to Schedule 3 of your Form 1040.
The two credits use the same adjusted-expense input but calculate differently. Only one credit can be claimed per student per year, and both credits cannot be claimed for the same student in the same year.
| Feature | American Opportunity Credit (AOTC) | Lifetime Learning Credit (LLC) |
|---|---|---|
| Maximum credit | $2,500 per eligible student | $2,000 per tax return |
| How it is figured | 100% of first $2,000 + 25% of next $2,000 of expenses | 20% of first $10,000 of expenses (all students combined) |
| Refundable? | Yes, up to 40% ($1,000) | No, nonrefundable |
| Years allowed | First 4 years of postsecondary study only | Unlimited number of years |
| Enrollment | At least half-time, one academic period | One or more courses, any load |
| Degree required? | Yes, degree or credential program | No, courses to acquire or improve job skills count |
| Books and supplies | Qualify even if not paid to the school | Qualify only if required and paid to the school |
| Felony drug conviction | Disqualifies the student | No effect |
Income limits are identical for both credits. For 2025, the credit phases out as modified adjusted gross income (MAGI) rises from $80,000 to $90,000 (single) or $160,000 to $180,000 (married filing jointly). Above the top of the range, no credit is allowed. Your modified adjusted gross income is a separate calculation from your total 1098-T figures.
What counts as a qualified expense
Qualified tuition and related expenses are tuition and fees required for enrollment or attendance at an eligible institution. Required course materials count differently by credit. Expenses for room and board, insurance, medical costs, transportation, and personal living costs never qualify for either credit, even when paid to the school.
- Always qualified: tuition and mandatory enrollment fees.
- AOTC only, without paying the school: books, supplies, and equipment required for a course, even if bought from a third party.
- LLC: books, supplies, and equipment only if required and paid directly to the institution as a condition of enrollment.
- Never qualified: room and board, transportation, health insurance, and similar personal expenses.
A common correction: because Box 1 can include prepaid amounts for a term beginning January through March (Box 7 will be checked), and because it may omit expenses you paid outside the school’s billing, your usable expense figure often differs from Box 1. Keep account statements and receipts to reconcile.
Reading the rest of the form: Boxes 2 through 10
The remaining boxes provide context and adjustments. Box 2 is reserved and left blank (schools stopped reporting amounts billed after 2017). Box 3 is also generally unused. The prior-year adjustment boxes can require you to recapture part of a credit claimed in an earlier year.
- Box 4: adjustments (reductions) to qualified expenses reported for a prior year, which may require recapturing a prior-year credit.
- Box 6: adjustments to scholarships or grants reported for a prior year, which may affect a prior-year credit.
- Box 7: checked if Box 1 includes payments for a term beginning January through March of the next year.
- Box 8: checked if the student was enrolled at least half-time, a signal relevant to AOTC eligibility.
- Box 9: checked if the student is a graduate student, who is generally ineligible for the AOTC but may claim the LLC.
- Box 10: insurer reimbursements or refunds of qualified expenses.
FAQ
Do I need a 1098-T to claim an education credit?
Generally yes for the AOTC and LLC, but there are exceptions. If your school was not required to issue one (for example, expenses were fully covered by scholarships, or you were a nonresident alien), you may still claim a credit if you can substantiate your qualified payments with statements and receipts. Keep documentation, because the IRS may ask for it.
Why is Box 1 different from what I actually paid?
Box 1 reports payments received on a qualified-expense basis, capped at billed qualified charges, and it can cross calendar years. It excludes amounts you paid above billed qualified tuition and may include prepaid spring-term charges (Box 7 checked). Reconcile Box 1 against your bursar account statement to find the amount you can actually use for a credit.
Are scholarships in Box 5 taxable?
Scholarships and grants used for qualified tuition and required fees are generally tax-free. Amounts that exceed qualified expenses, or that pay for room and board, are generally taxable income to the student and may need to be reported on Form 1040. A Box 5 figure larger than Box 1 is a signal to check for a taxable portion.
Can I claim both the AOTC and the LLC?
Not for the same student in the same year. You may claim only one credit per student per year, though a family with multiple students can claim the AOTC for one and the LLC for another. In many cases the AOTC gives the larger benefit for undergraduates in their first four years because part of it is refundable.
Who claims the 1098-T, the parent or the student?
Whoever claims the student as a dependent generally claims the credit and reports the 1098-T. If parents claim the student as a dependent, the parents claim the credit even if the student’s name is on the form. If no one claims the student as a dependent, the student may claim the credit on their own return.
What if my scholarships fully covered tuition?
If tax-free scholarships covered all qualified expenses, you may have no expenses left for a credit and may not receive a 1098-T. In some cases it can pay to treat part of a scholarship as taxable (freeing up expenses for the AOTC), but this depends on your bracket and the numbers. Compare the added tax against the credit gained before choosing.
How does the 1098-T relate to the 1098 mortgage form?
They are unrelated despite similar names. The Form 1098 mortgage interest statement reports home mortgage interest for a possible itemized deduction, while the 1098-T reports tuition for education credits. If you are deciding between deduction strategies, see our guide on standard vs itemized deductions. Education credits are one of many benefits catalogued in our federal tax credits database.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.