There are so many tax credits that it’s hard to determine which ones you quality for. As a student, one of those tax credits is the American Opportunity Credit. The credit is meant to help students by providing up to $2500 to help cover the costs of education. Students that make any sort of financial transaction to cover tuition costs will receive a 1098-T Tuition Statement Form. Similar to a tax form you receive from an employer, the form has a number of boxes that you need to understand so that you can properly file your taxes.
What Is the 1098-T Tuition Statement Form?
According to Carroll Community College, “The 1098-T tax formÂ informs the taxpayer ifÂ he/she is eligible for theÂ American Opportunity Credit Â in tax year 2012. The American Opportunity Credit provides a maximum tax credit of $2,500 for tax year 2012 based on the taxpayers modified adjusted gross income (MAGI). The amount of the tax credit is gradually reduced if your MAGI are between $80,000 to $90,000 for single, head of household, widow(er)Â taxpayers and $160,000 to $180,000 for taxpayers married filing joint.” In other words, the statement is meant to give the student a better idea of what needs to be reported to the IRS for tax credit purposes.
How Is It Used?
The 1098-T form is used so that students/taxpayers can fill out IRS Form 8863. This form is used to determine if the student or taxpayer qualifies for the American Opportunity or Lifetime Learning Credits. The student is not required to use the form. However, should the student decide to use the form, the student must not be a dependent.
What Does It Mean to the Student?
Exactly what the form means to you depends on which boxes are checked on the form. The second box will list the amount of tuition and eligible fees that were charged during the calendar year. Box 4 takes any adjustments into account, such as tuition for the calendar year that was paid in previous years. In box 5 you’ll find information on any financial aid that was paid against the total. Box 6 lists scholarships and grants that were awarded in the previous year to be used during the current tax year. Lastly, box 8, which is probably the most important for the student, is marked if the student qualifies for the American Opportunity Credit.
Getting more money back on your taxes is always a good thing, and if you’re not sure, check with Turbo tax or your own tax provider for more info. Getting money back for going to college is even better. Don’t toss the 1098-T form aside until you determine whether or not you get money back for the amount of tuition and fees paid.