What Is The 1098-T Tax Credit And How Can You Claim It?
If you're a college student or parent of a college student, you've probably heard of the 1098-T tax credit and have questions about how it works and how you can claim it. The 1098-T tax credit is a tax credit available to eligible students and their parents to help offset the cost of higher education. It can be used to reduce the amount of income tax you owe, or as a refundable tax credit. In this article, we'll explain what the 1098-T tax credit is and how you can claim it.
What is the 1098-T Tax Credit?
The 1098-T Tax Credit is a tax credit available to eligible college students and their parents. It is designed to help offset the cost of higher education by reducing the amount of income tax you owe or providing a refundable tax credit. The credit can be used for tuition and fees, as well as for books, supplies, and equipment related to the student's enrollment or attendance at an eligible educational institution.
Who Is Eligible for the 1098-T Tax Credit?
To be eligible for the 1098-T tax credit, the student must be enrolled in an eligible educational institution. Generally, eligible institutions include accredited public, nonprofit, and privately-owned colleges and universities. Additionally, the student must be enrolled in an eligible educational program, which generally includes degree and certificate programs that lead to a recognized credential.
How Much Is the 1098-T Tax Credit Worth?
The amount of the 1098-T tax credit varies depending on the amount of qualified tuition and fees paid. Generally, the credit is 20% of the amount of tuition and fees paid, up to a maximum credit of $2,500. The credit is phased out for taxpayers with incomes between $80,000 and $90,000 for single taxpayers, and between $160,000 and $180,000 for married couples filing jointly.
How Do You Claim the 1098-T Tax Credit?
To claim the 1098-T tax credit, you must complete Form 8863 and attach it to your federal income tax return. You'll need to provide information about your tuition and fees, as well as information about the eligible educational institution. Additionally, you'll need to provide a copy of your Form 1098-T. This form is provided to you by your school and includes information about your tuition and fees paid during the tax year.
What Else Should You Know About the 1098-T Tax Credit?
It's important to note that the 1098-T tax credit is only available for tuition and fees paid during the tax year. It does not include any other expenses such as room and board, books, supplies, or equipment. Additionally, the credit does not apply to any payments made with tax-free funds such as scholarships, grants, employer tuition assistance, or other tax-free payments. Finally, the 1098-T tax credit is a nonrefundable tax credit, meaning it can only reduce your taxes owed, not generate a refund.
Conclusion
The 1098-T tax credit is a great way to help offset the cost of higher education. It can be used to reduce your income tax liability or as a refundable tax credit. To be eligible for the credit, you must be enrolled in an eligible educational institution and be enrolled in an eligible educational program. Additionally, you must complete Form 8863 and attach it to your federal income tax return. Finally, keep in mind that the credit only applies to tuition and fees paid during the tax year, and does not include other expenses such as room and board, books, supplies, or equipment.