1098-T Box 1: Qualified Expenses, Scholarships, and Credits

Box 1 of Form 1098-T reports the total dollars your school received during the calendar year for qualified tuition and related expenses, from any payer, and it is the starting number you use to figure the American Opportunity Tax Credit or the Lifetime Learning Credit. It isn’t the amount you can claim. Scholarships, timing rules, off-campus purchases, and who claims whom all push the final figure up or down before it lands on Form 8863.

What Box 1 Actually Reports

The label on Box 1 is “Payments Received for Qualified Tuition and Related Expenses.” Your school totals every payment it collected during the calendar year, from you, a parent, a grandparent, a 529 plan, or any third party, and reports that sum.¹ It reflects money the school actually received, not money it billed. A charge that sat unpaid on your account on December 31 doesn’t appear in Box 1 for that year.

One point trips up a lot of filers: Box 1 is not reduced by scholarships or grants. If the school took in $15,000 in tuition payments and also applied $5,000 in scholarship funds to your account, Box 1 still shows $15,000. The scholarship total sits separately in Box 5, and you do the subtraction yourself.

What Counts as Qualified Tuition and Related Expenses

Only certain charges make it into Box 1. Qualified tuition and related expenses include tuition itself and mandatory fees every student must pay as a condition of enrollment, such as student activity fees or technology fees.² Course materials required for enrollment also count.¹

These common college costs are specifically excluded and won’t show up in Box 1 even when you pay them to the school:

Room and board
Insurance and student health fees
Transportation
Personal living expenses²

Expenses Box 1 Will Miss

For the American Opportunity Tax Credit, books, supplies, and equipment needed for your courses qualify even when you bought them from an outside bookstore or online retailer rather than from the school.³ A laptop you need for coursework falls under the same rule. The school has no record of those purchases, so they won’t appear in Box 1. Track them separately and add them to your qualified expenses when you file.

The Lifetime Learning Credit is narrower. Books and equipment generally qualify for the LLC only when the school requires you to buy them directly from the institution.

Subtracting Scholarships to Get Your Net Qualified Expenses

To find the expenses eligible for a credit, subtract Box 5 (scholarships and grants) from your total qualified expenses. Pay $12,000 in qualified tuition, receive $4,000 in grants, and your net qualified expenses are $8,000. That $8,000 is what feeds the credit formula.

When Box 5 is larger than your qualified expenses, the excess may be taxable income. A student with $15,000 in scholarships but only $12,000 in qualified tuition has $3,000 that is potentially taxable if it was used for non-qualified costs like room and board. If that taxable amount wasn’t reported on a W-2, you report it on Schedule 1, Line 8 of Form 1040.⁴

The school reports what it processed. You know how the money was actually spent. If scholarship funds covered qualified items like required books bought off campus, that can shift the taxable amount.

When Box 1 and Your Records Don’t Match

Box 1 is an informational starting point, not the final word. The IRS holds you responsible for substantiating your actual qualified expenses, so keep bank statements, card records, and detailed billing statements from the school.

The most common mismatch comes from the prepayment rule. Tuition paid in one calendar year for an academic period that begins in the first three months of the following year counts on the earlier year’s return.² Tuition paid in December 2025 for a spring 2026 semester starting in January counts as a 2025 expense for credit purposes.⁵ Your school may still put that payment on the 2026 Form 1098-T instead. When Box 7 is checked on the form you received, the school is telling you some of the Box 1 payments relate to an academic period starting in January through March of the next year. That is your signal to look at the timing carefully.

Other Boxes That Change Your Credit

A few other boxes feed directly into your calculation or flag issues worth checking.

Box 4: Prior-Year Payment Adjustments

If the school refunded or reimbursed tuition that appeared on a prior year’s 1098-T, that refund shows up in Box 4.¹ A Box 4 amount can mean you need to recapture part of a credit you claimed before. If you dropped a course in January and got a refund for fall tuition you already used in last year’s credit, you may owe additional tax for that prior year.

Box 6: Prior-Year Scholarship Adjustments

Box 6 reports reductions to scholarships or grants that were on a prior year’s 1098-T.⁶ If a scholarship was later reduced, your prior-year net expenses may have been higher than you thought, and amending that return could get you a larger credit.

Box 8: Half-Time Enrollment

Box 8 is checked if you were enrolled at least half-time during any academic period that year.⁶ The AOTC requires at least half-time enrollment; the LLC does not.

Turning Box 1 Into a Credit

Once you have your net qualified expenses, you pick the credit that fits.

American Opportunity Tax Credit

The AOTC is available for the first four tax years of higher education and caps at $2,500 per eligible student. You get 100% of the first $2,000 in net qualified expenses plus 25% of the next $2,000, so you need $4,000 in net expenses to hit the full $2,500. Up to 40% of the credit, or $1,000, is refundable, meaning you can get that portion back even if your tax bill is zero.⁷

The student must be pursuing a degree or recognized credential, enrolled at least half-time for at least one academic period during the year, not have completed the first four years of higher education, and not have a felony drug conviction at the end of the tax year.⁷ Four tax years is the lifetime cap per student, including any years the former Hope Credit was claimed. Claim it on Form 8863 attached to your return.⁸

Lifetime Learning Credit

The LLC covers a broader range of situations. There’s no cap on years, no half-time requirement, and no degree requirement; courses taken to improve job skills qualify. The credit equals 20% of up to $10,000 in net qualified expenses, maxing out at $2,000 per return (not per student).⁹ The LLC is entirely nonrefundable. You cannot claim both credits for the same student in the same tax year, though you can mix credits across different students on one return.¹⁰

Income Limits

Both credits phase out at the same Modified Adjusted Gross Income levels:

Single filers: phase-out from $80,000 to $90,000 MAGI.
Married filing jointly: phase-out from $160,000 to $180,000.¹⁰

Above the upper limit, nothing. Married couples filing separately cannot claim either credit.

Who Claims It

If someone claims you as a dependent, you cannot claim an education credit on your own return. The person claiming you takes the credit instead.¹⁰ Most undergraduates whose parents claim them don’t file for the credit themselves; the parent does. Getting this backwards is a fast way to draw IRS attention.

Coordinating With a 529 Plan

If tuition came from a mix of 529 withdrawals and out-of-pocket money, the same dollar of qualified expense cannot be used both to claim an education credit and to justify a tax-free 529 distribution. That’s the no-double-benefit rule.⁵

A common approach is to pay at least $4,000 of qualified expenses from non-529 sources to maximize the AOTC, then use 529 funds for the rest of tuition and for room and board. Reduce your qualified expenses first by any tax-free educational assistance, then again by the amount used to figure your credit; whatever remains can be covered by tax-free 529 distributions.⁵ Allocate wrong and part of your 529 distribution becomes taxable, or you lose the credit.

If You Didn’t Receive a 1098-T

A 1098-T is generally required to claim an education credit, but schools don’t have to issue one in every case. Exceptions include nonresident alien students (unless they request a form), students whose tuition was entirely covered by scholarships, and students whose expenses are paid through a formal billing arrangement with an employer or government agency such as the Department of Veterans Affairs.³

If you fall into one of those categories, or your school closed before issuing the form, you can still claim the AOTC. You’ll need to show you were enrolled at an eligible institution and substantiate your qualified expenses with your own records.³ Keep enrollment verification and payment receipts in case the IRS asks.

1
Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025)
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Internal Revenue Service. Qualified Education Expenses
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Internal Revenue Service. Education Credits: Questions and Answers
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Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants
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Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
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Internal Revenue Service. Instructions for Forms 1098-E and 1098-T
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Internal Revenue Service. American Opportunity Tax Credit
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Internal Revenue Service. About Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
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Internal Revenue Service. Lifetime Learning Credit
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Internal Revenue Service. Education Credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)