If your child is your dependent, you claim their 1098-T on your own tax return, not theirs, and you take the education credit that comes with it. That holds even when your child paid the tuition from a summer job, a student loan, or savings, and it holds when a grandparent wrote the check directly to the school. Claiming your child’s 1098-T on your tax return depends on one thing above all: whether the child qualifies as your dependent for the year.
Does Your Child Qualify as Your Dependent
Four tests have to line up at the same time under the federal definition of a qualifying child.1Office of the Law Revision Counsel. 26 USC 152 – Dependent Defined
- Age. Under 19 at year end, or under 24 if a full-time student. Full-time means enrolled full-time for at least five months of the calendar year.
- Residency. Lived with you more than half the year. Time away at college counts as a temporary absence, so a student in a dorm still meets the test.2Internal Revenue Service. Publication 501 (2025), Dependents, Standard Deduction, and Filing Information
- Support. The child did not provide more than half of their own support. Scholarship money does not count as self-support in this calculation, which matters for students on large merit awards.1Office of the Law Revision Counsel. 26 USC 152 – Dependent Defined
- Joint return. The child did not file a joint return with a spouse, unless the return was only to claim a refund.
If any one of the four fails, your child isn’t your dependent, and the 1098-T goes on the child’s return instead.
Who Actually Claims the Credit
Only the person who claims the student as a dependent can claim the education credit for that student. If you list your child on your return, the credit is yours and your child cannot also take it.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
The rule that surprises families is payment attribution. It doesn’t matter whose money paid the school. If your child paid with a part-time job or with student loans in the child’s own name, the IRS treats those payments as if you made them, because the child is your dependent. When a grandparent pays the school directly, the money is treated as a gift to the student, the student is treated as paying the school, and you are treated as paying because the student is your dependent. In every case the credit lands on the return that claims the dependency.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
You can choose not to claim your child as a dependent, and in that case the child can claim the credit on their own return. Only one return benefits from a given student’s expenses in a given year, so this is worth running both ways in tax software before either of you files.
Which Credit Your 1098-T Supports
Two credits work off the same form, and you pick one per student per year.
American Opportunity Tax Credit
The AOTC pays 100% of the first $2,000 of qualified expenses and 25% of the next $2,000, up to $2,500 per student. You can claim it for up to four tax years per student, and the student has to be enrolled at least half-time in a program leading to a degree or recognized credential.4Internal Revenue Service. Education Credits: AOTC and LLC Qualified expenses include tuition, required fees, and required course materials such as textbooks and lab supplies, whether bought from the campus store or elsewhere.5Internal Revenue Service. Qualified Education Expenses Up to 40% of the credit, capped at $1,000, is refundable, so you can get part of it back even if your tax bill is already zero.6Internal Revenue Service. American Opportunity Tax Credit
Lifetime Learning Credit
The LLC is 20% of up to $10,000 in qualified expenses, capped at $2,000 per return rather than per student. There’s no year limit, no half-time requirement, and no requirement that the student pursue a degree. It’s entirely nonrefundable.7Internal Revenue Service. Lifetime Learning Credit It generally covers only expenses paid to the institution, so bookstore purchases usually don’t count the way they do for the AOTC.
If you have more than one child in school, you can claim the AOTC for one and the LLC for another on the same return, but not both credits for the same student in the same year.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Income Limits and Filing Status
Both credits use the same income cutoffs. You get the full credit at modified adjusted gross income of $80,000 or less ($160,000 or less if you’re filing jointly). Between $80,000 and $90,000 (or $160,000 and $180,000 jointly) the credit shrinks, and it disappears above the top of that band.6Internal Revenue Service. American Opportunity Tax Credit
One filing status ends the analysis: married filing separately. You cannot claim either education credit on an MFS return.8Office of the Law Revision Counsel. 26 USC 25A – American Opportunity and Lifetime Learning Credits Couples who file separately for other reasons need to weigh that against a credit worth up to $2,500.
Your child also needs a valid Social Security number, ITIN, or ATIN issued by the return’s due date, extensions included. Without it, the credit gets denied regardless of everything else.4Internal Revenue Service. Education Credits: AOTC and LLC
Reading the 1098-T Boxes
Eligible schools send Form 1098-T to students by January 31 each year.9Internal Revenue Service. About Form 1098-T, Tuition Statement Two boxes do the heavy lifting for you.
- Box 1 shows total payments the school received for qualified tuition and required fees during the calendar year. It is not reduced by scholarships.10Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025)
- Box 5 shows scholarships or grants the school administered and applied to the student’s account.
Your starting number is Box 1 minus Box 5. That’s the out-of-pocket tuition the IRS recognizes. For the AOTC, add required course materials bought anywhere, not just at the school bookstore.5Internal Revenue Service. Qualified Education Expenses
Room, board, transportation, insurance, and health fees never count for either credit, even when they show up on the school’s bill.11Internal Revenue Service. Education Credits: Questions and Answers You also can’t count any expense paid with tax-free scholarship money. Save receipts for anything you bought outside the school; the 1098-T only reflects what the institution processed.
If You Used a 529 or Scholarships
You can take a 529 distribution and an education credit in the same year, but not for the same dollars.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education A common approach is to pay the first $4,000 of tuition from non-529 sources so those expenses fully support the AOTC, then use the 529 for the rest of tuition plus room, board, and other 529-qualified costs. If you route all tuition through the 529, you may leave no expenses standing to support a credit.
Scholarships work in a similar way. When a scholarship exceeds tuition and fees and the excess pays for living costs, that excess is taxable to the student.12Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants Some families deliberately treat part of a scholarship as taxable so the matching tuition dollars stay available for the AOTC. When the student is in a low bracket, the tax on the extra scholarship income can be well below the $2,500 credit that gets preserved. The math is specific to your numbers, so run it before you decide.
How to Put It on Your Return
Education credits are claimed on Form 8863, attached to your Form 1040. You’ll pull three items from the 1098-T: the student’s name, the student’s Social Security number, and the school’s employer identification number.13Internal Revenue Service. Instructions for Form 8863 (2025) Part III of the form walks through the credit calculation for the student; for the AOTC you enter up to $4,000 in adjusted qualified expenses and the form applies the 100%/25% formula.14Internal Revenue Service. Form 8863 (2025) Education Credits The refundable portion of the AOTC lands on Form 1040, line 29, and the nonrefundable portion flows to Schedule 3, line 3. The LLC, being fully nonrefundable, is figured in Part II of Form 8863.
Records and the Cost of Getting It Wrong
Keep the 1098-T, Form 8863, and receipts for course materials for at least three years after you file. That’s the IRS’s standard audit window, and education credits are among the items commonly flagged for verification.15Internal Revenue Service. Managing Your Tax Records After You Have Filed
A careless AOTC claim can cost more than the credit itself. If the IRS finds you recklessly disregarded the rules, you’re barred from the AOTC for two years. A fraudulent claim triggers a ten-year ban. Those bans apply to the AOTC, not the LLC.16Internal Revenue Service. Return Related Penalties Get the dependency question, the income limits, and the Box 1 minus Box 5 math right the first time, and the 1098-T does exactly what parents want it to do.