Confusion comes from what the form is not. It isn't a tax credit, an income statement, or proof that you qualify for anything. This guide covers who claims the benefit, how to reconcile Boxes 1 and 5 against your own records, how to report taxable scholarships separately, and what to keep on file.
Line references below come from IRS drafts for tax year 2026 and are provisional until the final forms are released. Amounts are in US dollars.
Key Takeaways
- Form 1098-T is source information for Form 8863 and scholarship tax analysis, not a Form 1040 entry.
- Education credits run from Form 8863 to Schedule 3 and then to Form 1040.
- The taxpayer entitled under the dependency rules claims the credit, not automatically the name on the form.
- Boxes 1 and 5 are starting points. Check them against payment records.
What Is Form 1098-T and Why Does It Matter?
What the form reports
Eligible educational institutions, such as colleges, universities and vocational schools, issue Form 1098-T (Tuition Statement). It reports:
- Payments received for qualified tuition and related expenses
- Scholarships or grants the school processed
- Enrolment details
Who receives it
Students receive it on paper or electronically, with electronic delivery requiring consent. Schools generally don't have to issue it when:
- the course carries no academic credit
- the student is a nonresident alien, unless the student requests one
- tuition was waived or paid entirely by scholarships or grants
If your form is missing, ask the school for a copy. If your name or SSN is wrong, the school corrects it for future reporting.
What receiving it does not mean
Receiving the form does not make any amount taxable on its own, and it does not qualify you for the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC). Eligibility still depends on your expenses, income, enrolment, dependency status and other IRS rules.
Where to Put Form 1098-T on Your 1040
No separate Form 1040 line
The draft 2026 Form 1040 has no 1098-T line. You use the form's data to complete other forms, then keep it with your records.
Use Form 8863 for education credits
You complete Form 8863 using the 1098-T, school billing records, payment confirmations and scholarship details. The draft form asks whether the student received a 1098-T and, for AOTC claims, requires the school's EIN.
Per the 2026 draft instructions, the allowable credit flows like this:
- Form 8863, line 19
- Schedule 3, Part I, line 3
- Schedule 3, line 8
- Form 1040, line 20
The refundable AOTC portion (40% of the allowable AOTC) goes from Form 8863, line 8, to Form 1040, line 29. Confirm every line number against the final forms for your filing year.
Report taxable scholarships separately
A scholarship used for nonqualified costs may be taxable. In the draft 2026 Schedule 1, scholarship and fellowship grants not reported on Form W-2 go on line 8r.
Under the final TY2025 Publication 970, amounts reported on a W-2 are included in wages on Form 1040, line 1a.
Keep the two tracks apart. Form 1098-T Box 5 is not automatic income, and the same dollars should not be counted in both a credit calculation and an income entry without checking the rules.
How e-filing software handles it
Software usually asks for 1098-T details in an education interview rather than showing a "1098-T" line. Keep the form and supporting records even if you never attach anything.
How to Read Form 1098-T and Calculate Eligible Expenses
Start with Box 1, then verify
Box 1 shows payments the school received for qualified tuition and related expenses. Reconcile it against:
- billing statements and payment confirmations
- academic-period timing
- employer assistance and refunds
- expenses paid by a parent or another person
Expenses paid in 2026 can count for an academic period starting in 2026 or in the first three months of 2027. Loan-funded expenses count in the year you pay them, not the year the loan arrives.
Account for Box 5 scholarships and grants
Tax-free scholarships and other tax-free aid reduce the expenses available for a credit. Don't just subtract Box 5 from Box 1. You may have qualified expenses paid outside the school, and some scholarship money may be taxable.
Review the remaining boxes
| Box | What it tells you |
|---|---|
| 4 | Adjustments to prior-year payments, such as refunds |
| 6 | Adjustments to prior-year scholarships or grants |
| 7 | Box 1 includes an academic period starting January to March of next year |
| 8 | Student was at least half-time |
| 9 | Student was a graduate student |
| 10 | Insurer reimbursements of qualified expenses |
A checked box doesn't guarantee a credit. It only helps you test eligibility.
Boxes 4 and 6 matter when prior-year figures change. Per the final TY2025 Publication 970, aid or refunds received before filing reduce that year's expenses. If you receive them after filing and the earlier credit was too large, you may owe additional tax in the year received.
An error found on a filed return may need an amended return instead. Get professional advice for these cases.
Qualified versus nonqualified expenses
- American Opportunity Tax Credit (AOTC): tuition, required enrolment fees, and course materials needed for the course, even if bought elsewhere
- Lifetime Learning Credit (LLC): course materials only when paid directly to the school as a condition of enrolment
- Not qualified: room and board, insurance, medical costs, transportation, personal or living expenses
Who Claims the Credit and How Scholarships Are Taxed
Parent versus student
If a taxpayer claims the student as a dependent, that taxpayer claims the credit for the student's qualifying expenses. The student can't claim it. If nobody claims the student, only the student can. The name on the 1098-T doesn't decide this.
Expenses paid by a claimed dependent, or by a third party for that dependent, are treated as paid by the taxpayer claiming the dependent. Don't stretch this to every third-party payment.
Dependency tests
The qualifying-child tests cover relationship, age, residency, support and joint return. Under Publication 501 (2025), the age test is:
- Under 19 at year end
- Under 24 if a full-time student
- Any age if permanently and totally disabled
Full-time status generally means attendance during some part of each of five calendar months.
AOTC versus LLC
Figures are provisional, based on the draft 2026 instructions.
| Feature | AOTC | LLC |
|---|---|---|
| Maximum | $2,500 per student | $2,000 per return |
| Refundable | Up to 40% | No |
| Years | First four years of postsecondary study | Unlimited |
| Enrolment | Degree or certificate, at least half-time | Any course that is part of a degree program or builds job skills |
| MAGI phaseout | $80,000-$90,000 single; $160,000-$180,000 joint | Same ranges |
Married filing separately can't claim either credit. You can't claim both credits for the same student in the same year.
When scholarships are taxable
A scholarship is generally tax-free only for a degree candidate at an eligible institution, and only up to qualified expenses. It's taxable to the extent it:
- pays for room and board or other nonqualified costs
- is earmarked for nonqualified purposes
- is payment for required teaching, research or other services
Publication 970 also discusses voluntarily including some tax-free scholarship in income, where the award terms allow, so those funds no longer reduce expenses for a credit. It's a coordination option, not automatic.
Avoid double benefits
Expenses paid with tax-free educational assistance can't also support a credit. With several students or claimants in one family, map each expense to one benefit before filing.
Form 1098-T Filing Checklist and Common Mistakes
Reconcile before entering anything
- Compare Boxes 1, 4, 5, 6, 7, 8, 9 and 10 with school invoices.
- Match payments to confirmations and bank records.
- List scholarships, refunds and employer aid.
- Add course-material costs bought outside the school.
- Confirm which taxpayer claims the student.
Missing or wrong forms
Contact the school first and keep proof of enrolment and qualified payments. Don't invent a Box 1 figure. Form 8863 still allows a credit in limited cases (for example where the school was not required to furnish a form), if you can substantiate the claim.
Mistakes carry real risk. TIGTA estimated a 30.7% improper-payment rate for the AOTC in FY2025, about $1.5 billion on $5.0 billion paid. That is an estimated rate, not a taxpayer error rate, but it shows how often these claims go wrong.
If an AOTC was previously disallowed, Form 8862 may be required before you claim it again. Keep records for three years in most cases, and longer when a longer assessment period applies.
When professional review helps
Get a second pair of eyes if you have:
- prior-year adjustments or amended returns
- taxable scholarships
- more than one possible claimant
- cross-border education or Form 1040-NR questions
- conflicting school records
Nonresident aliens generally cannot claim education credits unless treated as resident aliens for tax purposes. This matters for Australians studying in the US.
VJM Global's US-compliant tax professionals prepare Form 1040 and 1040-NR returns and can reconcile 1098-T data with Form 8863, scholarship reporting and the wider federal return.
Frequently Asked Questions
Where do I put my 1098 on my 1040?
You generally don't. Form 1098-T has no standalone Form 1040 line. Its information feeds Form 8863 and, if relevant, scholarship income reporting.
Is a 1098-T taxable income?
Receiving the form isn't taxable. Some scholarship or grant amounts may be, depending on how the funds were used.
Who claims the 1098-T, student or parent?
The taxpayer who claims the student as a dependent evaluates the credit, subject to IRS rules. If no one claims the student, the student may claim it.
Do I attach Form 1098-T to my tax return?
Generally keep it with your records rather than attaching it. Follow instructions from your filing method or the current IRS forms.
Can I claim an education credit without a Form 1098-T?
Possibly. Limited exceptions exist, such as a school not being required to issue one. You must still substantiate enrolment and qualified payments.
