Tuition Expenses- IRS Form 1098-T; What To Do?
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Form 1098-T
What is a IRS Form 1098-T and what do you do with it once you get it? This tax form is sent to you by any eligible educational institution to report the amount of your educational expenses. There are two types of educational credits you may be eligible for. One is called the Hope Credit and the other is called the Lifetime Learning Credit. The amount of your educational credit would be entered on line 50 on form 1040. Both of these credits are considered tax credits which means that they are directly subtracted from your tax liability giving you a dollar for dollar credit. There are similarities and differences in these two education credits. Both are credits for educational expenses such as; tuition, books, fees, or any expense that is a condition of your enrollment. The differences are outlined below.
Hope Credit
With the Hope Credit. each student may be eligible for up to $1800.00 of qualified expenses. It is only available for the first two years of college and only for two years per student. In addition, each student must be enrolled at least half time, be pursuing an undergraduate degree and not have a felony drug conviction on their record. (evidently, any other type of felony is permitted).
The Lifetime Learning Credit, on the other hand, is available for any and all years of post secondary education and any courses or classes that are taken to improve one's job skills. It can be taken for an unlimited number of years as long as the student has eligible expenses and a criminal record is not taken into consideration. The monetary limits are 20% of up $10,000.00 per return. So even if there are more than one student eligible for that credit, each return can only reflect one credit to it's monetary limit.
In claiming the credit, you must fill out form 8863 and attach it to your 1040 form. Once you have figured your credit, report it on line 50 of your 1040 form. For more information, see Pub. 970 of the IRS tax code.
Source: Liberty Tax Service, 2009
Education Tax Credits
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