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What should I do with my 1098-T? When youre ready to file your federal income tax return, make sure you have your Form 1098-T on hand if you received one. It can help you calculate two potentially valuable education credits the American opportunity tax credit and the lifetime learning credit.
The 1098-T form can be kept with your records and does not need to be sent to the IRS with your income tax return as the university sends your 1098-T information to the IRS. More information can be found at the IRS.
The Form 1098-T is a form provided to you and the IRS by an eligible educational institution that reports, among other things, amounts paid for qualified tuition and related expenses. The form may be useful in calculating the amount of the allowable education tax credits.
Second, the information on the 1098-T form may be used to determine if any scholarships or grants you received during the tax year are taxable. If the scholarships or grants exceed your qualified tuition and related expenses, the excess amount may be taxable as income.
If there were not taxable scholarships or grants, you do not have to amend. If Box 5 is more than your tuition, it may be treated as taxable income and you should amend to avoid any penalties or interest that might be calculated on an underpayment or excess refund.
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Your college or career school will provide your 1098-T form electronically or by postal mail if you paid any qualified tuition and related education expenses during the previous calendar year.
The amount that you are eligible to use to reduce your tax bill is, in most cases, simply the amounts paid for tuition and fees minus the amount of scholarships you received. You can only receive a deduction or credit for the amount of expenses that you paid out of pocket.
Payments made directly to the lender, as well as those made to the employee, qualify. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year.

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