That trips up many students, parents and families with ties to Australia who file US returns. This guide covers where the results land, whether to attach the form, who claims the student, and which records to keep. Line numbers below refer to the 2025 forms, so check the instructions for your own filing year.
Key Takeaways
- Don't copy Box 1 or Box 5 straight onto Form 1040.
- Form 1098-T supports Form 8863, and the credit then flows through Schedule 3 and Form 1040.
- Taxable scholarship amounts generally go through Schedule 1 to Form 1040.
- Keep the form with your records. Form 8863 is what gets attached.
What Form 1098-T Reports and Why It Matters
What is Form 1098-T?
Form 1098-T is a Tuition Statement. Eligible educational institutions issue it for enrolled students with reportable transactions, and insurers issue it for certain tuition reimbursements. The IRS's Form 1098-T instructions tell recipients to use it to complete Form 8863.
It reports what the school recorded. It does not decide your credit, your taxable scholarship amount or your eligibility.
The boxes that matter
| Box | What it shows |
|---|---|
| 1 | Payments received for qualified tuition and related expenses, less refunds in the same year |
| 4 | Adjustments made for a prior year |
| 5 | Scholarships or grants the school administered |
| 6 | Adjustments to scholarships or grants for a prior year |
| 7 | Whether Box 1 includes amounts for a term starting in the first three months of the next year |
| 8 | At least half-time student |
| 9 | Graduate student |
| 10 | Insurance contract reimbursements or refunds |
Boxes 4 and 6 deserve a second look. A prior-year adjustment isn't just another current-year payment, and it can reduce a credit or require repaying part of an earlier one. Box terminology can change between form years, so confirm it against the current form.
Why the amount may not match your return
Box 1 often differs from what you can actually use. Consider:
- Timing: expenses paid in 2025 can cover terms beginning in 2025 or the first three months of 2026.
- Refunds: these reduce adjusted qualified expenses.
- Course materials: books, supplies and equipment bought outside the school can count for the American Opportunity Tax Credit (AOTC).
- Tax-free assistance: scholarships, Pell grants and employer education assistance reduce qualified expenses.
Reconcile the form against tuition bills, payment confirmations, student-account statements and scholarship letters. Don't rely on the form alone.
Where Does Form 1098-T Go on Form 1040?
Does it have its own line?
No. Treat it as a supporting document, not an income form. Its job is to feed the calculation of what, if anything, belongs on the return.
If you claim an education credit
You complete Form 8863 using the 1098-T information plus your own payment records. For the 2025 forms, the routing looks like this:
| Item | Path | Form 1040 destination |
|---|---|---|
| Nonrefundable AOTC and Lifetime Learning Credit (LLC) | Form 8863 line 19, then Schedule 3 line 3, then Schedule 3 line 8 | Line 20 |
| Refundable AOTC (40%, up to $1,000) | Form 8863 line 8 | Line 29 |
The Form 8863 instructions explain the refundable portion and its restrictions. Line numbers shift between years, so don't rely on last year's line numbers.
If a scholarship is taxable
A scholarship or grant becomes taxable when it exceeds qualified expenses or is used for nonqualified costs such as room, board or travel. The taxable amount is not automatically the figure in Box 5.
For 2025, taxable scholarship not reported as wages goes on Schedule 1, line 8r. Schedule 1, line 10 then carries to Form 1040, line 8. Confirm the route in the current Form 1040 instructions and Publication 970.
Do you attach Form 1098-T?
Generally, no. The recipient copy says to retain the statement for your records. Form 8863 is the form attached to your Form 1040 or 1040-SR. Keep the 1098-T and your supporting documents in case the IRS asks.
How to Decide What to Report: Credit, Taxable Scholarship, or Neither
Does an education credit apply?
Receiving a 1098-T doesn't mean you qualify for an education credit. For 2025, the IRS Publication 970 benchmarks are:
| Requirement | AOTC | LLC |
|---|---|---|
| Maximum | $2,500 per student | $2,000 per return |
| Refundable | Generally 40%, up to $1,000 | No |
| Income phaseout (single) | $80,000 to $90,000 | $80,000 to $90,000 |
| Income phaseout (joint) | $160,000 to $180,000 | $160,000 to $180,000 |
| Enrolment | At least half-time, credential program | One or more courses |
| Years | First four years of postsecondary study | Unlimited |
If you file as married filing separately, you can't claim either credit. The same student can't generate both credits in one year, and the same expense can't support two tax benefits.
Who claims the benefit: parent or student?
- If a parent actually claims the student as a dependent, the parent claims the credit and the student can't.
- If an eligible taxpayer is entitled to claim the student but doesn't, the student can claim it.
- If no one can claim the student, only the student can.
Payments made by a claimed dependent, or by a third party for that dependent, are treated as paid by the claiming taxpayer. Agree on who claims what before anyone files.
Reconcile expenses with scholarships and grants
Tax-free scholarships, Pell grants and employer assistance reduce the expenses available for a credit. Use full student-account records. Subtracting Box 5 from Box 1 isn't a reliable shortcut.
There is also an optional election. A student may include an otherwise tax-free scholarship in income and apply it to nonqualified expenses, leaving more expenses for the AOTC. The award terms must permit that use, and a tuition-only restricted award doesn't.
Is the scholarship taxable?
Amounts spent on required tuition, fees, books, supplies and equipment can be tax-free for a degree candidate. Amounts spent on room, board, travel or personal costs generally can't. Taxable scholarship income belongs to the student, even when a parent claims the student as a dependent.
Two simple scenarios
Parent claims a dependent. A parent claims their child, who is an undergraduate studying at least half-time. The parent pulls the 1098-T, tuition bills and payment records, then adjusts for scholarships and refunds. After Form 8863 is completed, the credit flows through Schedule 3 to Form 1040.
Student with a taxable scholarship. A student's scholarship covers tuition and also pays for housing. The housing portion isn't a qualified use, so that part is the student's income. It goes on the student's own return through Schedule 1, even if a parent claims the student.
Filing Checklist and Common 1098-T Mistakes
Before you file
Gather:
- Form 1098-T for the year, plus prior-year forms
- Tuition bills and proof of payment
- Scholarship, grant and employer-assistance details
- Enrolment details and dependency status
- Any refund or adjustment notices
Check that the student's name and taxpayer identification number are correct. If not, ask the school for a corrected form.
Common mistakes
- Entering the form as wages
- Copying Box 1 directly onto Form 1040
- Treating Box 5 as automatically taxable
- Letting both a parent and a student claim the same expenses
- Attaching the form when it isn't needed
If the form is missing, ask the school for it after January 31 and before you file. If the school wasn't required to furnish one, you may still claim a credit if you're otherwise eligible and can show enrolment and substantiate qualified payments.
For an AOTC claim, taxpayer identification numbers must be issued by the return due date, including extensions.
When professional help is worth it
Get a review if you face:
- International students or parents, or cross-border income
- Nonresident status (Form 1040-NR filers can't claim education credits)
- Complex dependency questions
- Prior-year adjustments or amended returns
- Uncertainty over taxable scholarship income
VJM Global's U.S.-compliant tax professionals prepare Form 1040 and 1040-NR returns and can review complicated education-reporting situations. This article is general information, not individualised tax advice.
Frequently Asked Questions
Where does Form 1098-T go on Form 1040?
It generally isn't entered directly. It supports Form 8863 for education credits or, when applicable, taxable scholarship reporting through Schedule 1.
Do I have to report Form 1098-T on my tax return?
Receiving it doesn't create a separate Form 1040 entry. You use its information if you claim an education credit or have taxable scholarship income.
Do I need to attach Form 1098-T to my tax return?
Generally you keep it with your records rather than attach it. Attach Form 8863 if claiming a credit, and verify current IRS instructions for your filing method.
Who claims the 1098-T, the parent or the student?
The taxpayer who claims the student as a dependent generally evaluates the credit. An eligible student not claimed as a dependent may claim it on their own return.
Does a 1098-T help or hurt my taxes?
It can help support an education credit. Scholarships used for nonqualified costs, or prior-year adjustments, can raise taxable income or reduce a benefit.
What is Form 1098-T?
It's a tuition statement from an eligible educational institution. It is used to evaluate education credits and possible scholarship reporting.
