The boxes on IRS Form 1098-T report, in order, the tuition payments your school received, scholarships it administered, adjustments to prior-year amounts, whether any payment covered a term starting early the next year, and your enrollment status. Those figures feed the American Opportunity Tax Credit or the Lifetime Learning Credit when you file Form 8863, but the 1098-T form boxes explained here are a starting point, not the final word on what you can claim. Here is what each box means and how to use it.
Box 1: Payments Received for Qualified Tuition and Fees
Box 1 shows the total payments your school received during the calendar year for qualified tuition and required enrollment fees. Qualified means tuition and mandatory fees. It does not include room, board, health insurance, parking, or other personal living costs.
Timing follows the payment, not the term. If you paid spring tuition in December, that payment lands on the 1098-T for the year you paid, even though classes start in January.
Why Box 2 Is Blank
Before 2018, schools could choose to report either amounts billed (Box 2) or amounts received (Box 1). Schools are now required to use Box 1, so Box 2 is effectively retired. If your form still shows a figure in Box 2, the school is using an outdated method, but the number still represents your qualified tuition costs.
Box 5: Scholarships and Grants
Box 5 reports the total scholarships and grants your school administered during the year, including institutional scholarships, Pell Grants, and other aid processed through the school. Loans don’t appear here because they aren’t free money.
This figure matters in two directions. First, it reduces the qualified expenses you can count toward an education credit: the IRS wants net expenses after tax-free scholarships. Second, if Box 5 is larger than Box 1, the excess may be taxable. Scholarship money used for anything other than tuition, required fees, books, supplies, and required equipment counts as income you need to report.1Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants A $15,000 scholarship that covered $10,000 in tuition and $5,000 in room and board produces $5,000 of taxable income.
Boxes 4 and 6: Adjustments to a Prior Year
Boxes 4 and 6 only appear when something your school reported last year has changed.
Box 4 shows reductions to qualified tuition that was reported in Box 1 on a prior year’s form. Dropping a class, a late refund, or a billing correction after the earlier 1098-T was issued can all produce a Box 4 figure. If you already claimed an education credit based on the original number, a Box 4 adjustment may require you to pay back part of that credit as a recapture on your current year’s return.
Box 6 is the mirror for scholarships. It reports adjustments to grants or scholarships that appeared in Box 5 on an earlier form. A reduction here could actually increase the eligible expenses for the prior year, though sorting that out can require amending the earlier return.
Box 7: Payment Covers a Term Starting Early Next Year
A checkmark in Box 7 tells you that some of the payments reported on this year’s form cover an academic period beginning in January through March of the following year.2Internal Revenue Service. Instructions for Forms 1098-E and 1098-T The typical case is paying spring tuition in December.
Education credits track when you paid, not when the term begins, so with Box 7 checked you can generally claim those expenses on the return for the year you made the payment. Just don’t claim the same tuition payment in two different tax years.
Boxes 8, 9, and 10: Status Checkmarks and Insurer Reimbursements
These three boxes report status rather than dollars.
Box 8 is checked if you were enrolled at least half-time during an academic period that began in the tax year. Half-time means at least half the full-time workload for your program, as your school defines it under Department of Education standards.2Internal Revenue Service. Instructions for Forms 1098-E and 1098-T This matters because the American Opportunity Tax Credit requires at least half-time enrollment.
Box 9 is checked if you were a graduate student. Graduate standing rules out the AOTC, which is only for the first four years of undergraduate education, and leaves the Lifetime Learning Credit as your option.
Box 10 is used by insurance companies, not schools. If an insurer reimbursed you for qualified tuition during the year, that amount appears here. Most students will see this box blank.
Why the Numbers on Your Form May Not Match What You Paid
The dollar figures on your 1098-T are not automatically the numbers you put on your tax return. The form reports what the school received or processed, which doesn’t always line up with what you personally paid out of pocket for qualified expenses.
A few common reasons for the mismatch: the school may have applied a payment to a different reporting period, financial aid timing can shift amounts between calendar years, and course-required books bought from a third-party retailer never appear on the form at all. The IRS says to rely on your own financial records, including receipts, bank statements, and student account histories, to determine the correct qualified expenses you paid.3Internal Revenue Service. Education Credits – Questions and Answers Treat the 1098-T as a reference, and keep documentation if your claimed expenses differ from Box 1.
Turning the Boxes Into an Education Tax Credit
The whole point of reading these boxes is Form 8863, where you claim one of two education credits.4Internal Revenue Service. Instructions for Form 8863 – Education Credits The calculation starts with qualified expenses (Box 1 or your own records, whichever is more accurate) minus tax-free scholarships and grants (Box 5). That net figure feeds the credit. You can only claim one credit per student per year.
American Opportunity Tax Credit
The AOTC covers the first four years of undergraduate education and is worth up to $2,500 per eligible student: 100 percent of the first $2,000 in qualified expenses plus 25 percent of the next $2,000.5Office of the Law Revision Counsel. 26 USC 25A – American Opportunity and Lifetime Learning Credits Hitting the maximum takes at least $4,000 in net qualified expenses after scholarships.
The credit is partially refundable. If it zeroes out your tax, up to 40 percent of the remainder, capped at $1,000, comes back as a refund.6Internal Revenue Service. American Opportunity Tax Credit
To qualify, the student must be enrolled at least half-time in a program leading to a degree or recognized credential (Box 8 is the proof), must not have finished the first four years of postsecondary education, must not have claimed the AOTC for four prior tax years, and must not have a felony drug conviction at the end of the tax year.6Internal Revenue Service. American Opportunity Tax Credit
For the AOTC, qualified expenses include books, supplies, and required equipment even if you bought them somewhere other than the school. That is broader than the figure in Box 1, which only captures what the school received.7Internal Revenue Service. Publication 970 – Tax Benefits for Education
Lifetime Learning Credit
The LLC equals 20 percent of up to $10,000 in qualified expenses, for a maximum of $2,000 per return (not per student).8Internal Revenue Service. Lifetime Learning Credit It is nonrefundable, so it can reduce tax to zero but won’t generate a refund on its own.
The tradeoff is flexibility. There is no degree requirement, no half-time minimum, no cap on the number of years you can claim it, and no drug-conviction disqualification.7Internal Revenue Service. Publication 970 – Tax Benefits for Education Graduate students (Box 9 checked), professionals taking continuing education, and anyone past four years of college usually land here.
One difference in what counts: for the LLC, books and supplies only qualify when you have to pay the school directly for them. A textbook from an online retailer doesn’t count toward the LLC the way it would for the AOTC.7Internal Revenue Service. Publication 970 – Tax Benefits for Education
Who Claims the Credit, and When You Can’t
If someone claims you as a dependent, you cannot claim an education credit on your own return. The person who claims you as a dependent claims the credit, even if you paid the tuition from your own account.9Internal Revenue Service. Education Credits – AOTC and LLC The school’s Employer Identification Number from your 1098-T goes on Form 8863 regardless of who files it.
A married couple filing separately cannot claim either credit.10Internal Revenue Service. Education Credits Joint filing is required.
Both credits phase out at the same income levels. You get the full credit if your modified adjusted gross income is $80,000 or less, or $160,000 or less filing jointly. The credit shrinks between $80,000 and $90,000 ($160,000 to $180,000 for joint filers) and disappears above those thresholds.6Internal Revenue Service. American Opportunity Tax Credit These limits are set by statute and don’t adjust for inflation.