Do You Get Money Back From Your 1098-T?

Filing your 1098-T can get you money back, but only through one specific route: the American Opportunity Tax Credit, which returns up to $1,000 as a refund even if you owe no federal tax.1Internal Revenue Service. American Opportunity Tax Credit The form itself is just an information return. It reports what you paid for tuition; it doesn’t send you a check. Whether any refund shows up depends on which education credit you qualify for, how much you actually paid out of pocket after scholarships, and where your income lands.

What the 1098-T Is

Your school sends Form 1098-T to you and to the IRS each year, usually by early February.2Internal Revenue Service. About Form 1098-T, Tuition Statement Two boxes drive everything:

If your Box 1 number doesn’t match what you actually paid, call the school’s bursar or financial office before you file. Schools are required to list an information contact on the form. The IRS will look at what you paid, not at what the school reported, if your return is questioned.

You can still claim a credit even without a 1098-T, if the school wasn’t required to issue one or has closed, as long as you can prove enrollment and payment.4Internal Revenue Service. Education Credits: Questions and Answers

The Credit That Actually Refunds Money

The American Opportunity Tax Credit is worth up to $2,500 per eligible student per year. It’s calculated as 100% of the first $2,000 of qualified expenses plus 25% of the next $2,000, so you need at least $4,000 in net qualified expenses to hit the maximum.1Internal Revenue Service. American Opportunity Tax Credit

Here’s the part that matters for a refund: up to 40% of the AOTC is refundable, capped at $1,000. That means if the credit wipes out your tax bill and there’s still credit left, the IRS pays you the difference, up to $1,000.1Internal Revenue Service. American Opportunity Tax Credit A student with no tax liability who qualifies for the full AOTC still gets $1,000 back. That’s the mechanism people are thinking of when they ask whether the 1098-T produces a refund.

To qualify for the AOTC, the student must be:

  • Within the first four years of higher education
  • Pursuing a degree or recognized credential at an eligible school
  • Enrolled at least half-time for at least one academic period during the year
  • Free of any felony drug conviction as of the end of the tax year1Internal Revenue Service. American Opportunity Tax Credit

Each school sets its own half-time threshold, subject to Department of Education minimums.5Internal Revenue Service. Publication 970, Tax Benefits for Education Check with the registrar if your course load is borderline.

The Credit That Won’t Produce a Refund on Its Own

The Lifetime Learning Credit is the fallback when the AOTC isn’t available: a fifth year of college, graduate school, part-time enrollment, or a single course to pick up job skills. It’s worth 20% of the first $10,000 in qualified expenses, up to $2,000 per return (not per student).6Internal Revenue Service. Lifetime Learning Credit

The LLC is entirely non-refundable. It can bring your tax bill to zero, but no leftover portion comes back as a check. If your only education credit is the LLC and you owe no tax, the credit produces $0 of refund on its own. It can still increase a refund you were already getting from withholding by reducing the tax those withholdings had to cover.

You can only claim one credit per student per year. Parents with two students in school can claim the AOTC for one and the LLC for the other, but not both credits for the same person.7Internal Revenue Service. Education Credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)

Who Actually Gets to Claim It

This is where families run into trouble. If the student is claimed as a dependent on someone else’s return, the student cannot claim the education credit. Whoever claims the dependent claims the credit.7Internal Revenue Service. Education Credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) It doesn’t matter who wrote the check. Even tuition paid from the student’s own savings is treated as paid by the parent for credit purposes.

A dependent student who files their own return gets no education credit. If the parents’ income is too high to qualify, the credit is simply lost that year. It doesn’t transfer to the student.

Two other filters apply. You can’t claim either credit if you file married filing separately. And if you or your spouse was a nonresident alien for any part of the year, you’re ineligible unless you elected to be treated as a resident alien for tax purposes.7Internal Revenue Service. Education Credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)

Income Limits That Shut the Credit Off

For 2026, both credits phase out at the same income levels based on modified adjusted gross income:

For most W-2 employees with no foreign income, MAGI equals your AGI from Form 1040. It only differs if you have foreign earned income or certain other exclusions.

What Counts as a Qualified Expense

Qualified expenses are narrower than most people assume. Tuition and required enrollment fees count for both credits. Books, supplies, and equipment needed for courses count for the AOTC even if you didn’t buy them from the school, so keep those receipts, because they often don’t appear on the 1098-T at all.1Internal Revenue Service. American Opportunity Tax Credit

Room and board, health insurance, transportation, and personal living expenses never qualify, even when the school bills them alongside tuition. You separate them out.

You then have to reduce qualified expenses by any tax-free educational assistance:

The net after those reductions is what feeds the credit calculation. Double-dipping isn’t allowed. If a 529 distribution already covered tuition tax-free, those dollars can’t also produce a credit.10Internal Revenue Service. 529 Plans: Questions and Answers

How to Claim the Credit

You claim either credit on Form 8863, attached to your Form 1040.11Internal Revenue Service. About Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) The form asks for the student’s information, the school’s employer identification number from the 1098-T, and your qualified expenses net of scholarships and other tax-free assistance. For the AOTC, Form 8863 splits the credit into the non-refundable portion (which reduces your tax) and the refundable portion (up to $1,000, which adds to your refund).

Tax software handles the split automatically once you enter the 1098-T. Hold onto the 1098-T, your tuition receipts, and any receipts for books and supplies for at least three years in case of audit.

If You Missed the Credit in a Prior Year

Amended returns are on the table. If you paid qualifying tuition in a prior year but never claimed the credit, you can file Form 1040-X within three years of the original filing deadline to claim it. Each year is calculated independently, so you file a separate 1040-X for each year you’re going back.

Penalties for Getting It Wrong

The IRS enforces AOTC eligibility aggressively. Recklessly disregarding the rules gets you banned from claiming the credit for two years. Fraud gets you banned for ten years.12Internal Revenue Service. 20.1.5 Return Related Penalties On top of the ban, you’d owe back the credit, plus interest, plus potentially a 20% accuracy-related penalty. Inflating expenses, claiming a fifth year as if it were within the four-year window, or claiming the credit for a student who wasn’t actually enrolled are the kinds of moves that trigger this. If your Box 1 figure looks too generous, verify it against your own records before you sign the return.