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1098 T

February 06, 2017 • Kareena Karnani • Log In to Post Comments

I am very confused by the new 1098T. Let's say that the amount on box 2 is $10,000 and amount on box 6 is $1,000. So university billed $10,000 and student had a loan for the whole amount and had $1,000 in scholarships. They would not be entitled to the AOTC ot the LLC because these amounts weren't actually paid...is that correct?  My tax software does not have a box that distinguishes box 1 from box 2 of 1098T so it is frustrating. 


Comments

Kareena,

The key is to figure out how much your client actually paid in 2016 for qualifying expenses for a 2016 academic year or for an academic year that begins within the first three months of 2017.  While the 1098-T contains required information, it does not always tell the whole picture.

Note that Box 1 only lists payments received by the university.  Books and other required materials can be included, even if not paid to the university, so it's possible expenses that are not listed on the 1098-T may qualify for the AOTC credit.

Box 2 only lists amounts billed for expenses in 2016, which may not include everything you paid in 2016.

Box 6 lists adjustments to scholarships for prior years.  This amount may not affect 2016 at all.

IRS Publication 970 contains much more information regarding qualifying expenses and how to claim the AOTC credit.

Mike , so if the payments are postponed as the student got a loan, they will not qualify for the education credits

Kareena,

As a cash-basis taxpayer, your client can only claim a credit for what they actually paid during the tax year.  If your client acquired a loan and then paid their tuition with the loan proceeds, then that qualifies as being paid by your clinet during the tax year.

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