A 1098-T can increase your refund, but only if you have education expenses and meet the income limits

The 1098-T form reports may have access to education expenses — tuition, fees, books, supplies — that you or a dependent paid during the tax year. If you claim the American Opportunity Tax Credit or the Lifetime Learning Credit using this form, you reduce the tax you owe. If that reduction is larger than the tax you already owe, the IRS sends you the difference as a refund.

The catch: you must have paid the expenses yourself, be enrolled at least half-time (for American Opportunity), and fall below the income limits. For 2024, the American Opportunity Credit phases out at $90,000 for single filers and $180,000 for married filing jointly. The Lifetime Learning Credit phases out at $80,000 and $160,000 respectively. If your income is above those thresholds, the 1098-T will not help your refund.

The form itself does not automatically increase your refund. You have to claim the credit on your tax return — either Form 8863 (Education Credits) or directly on your return if you use tax software. The software will walk you through the questions and calculate whether you benefit.

Key Takeaways

  • A 1098-T increases your refund only if you claim an education credit and that credit is larger than the tax you owe.
  • You must have paid may have access to education expenses yourself — the form reports what the school charged, not what you paid out of pocket.
  • Income limits explore: if you earn above $90,000 (single) or $180,000 (married filing jointly), the American Opportunity Credit phases out and may not help.
  • The form is just a report; you have to claim the credit on your return for it to affect your refund.

When a 1098-T actually increases your refund

The American Opportunity Tax Credit is worth up to $2,500 per student per year. If you owe $1,500 in tax and claim a $2,500 credit, you reduce what you owe to zero and receive a $1,000 refund. That is the increase. The Lifetime Learning Credit is worth up to $2,000 per return (not per student), and it works the same way — it reduces your tax bill, and any amount left over becomes a refund.

The 1098-T shows the school's charges, but the credit is based on what you paid. If your parents paid your tuition, or if you used a 529 plan or scholarship, those amounts do not count toward the credit. You can only claim expenses you paid with your own money, loans in your name, or grants that were not restricted to specific expenses.

If you have no tax liability — meaning you owe zero tax because your income is too low — the American Opportunity Credit can still produce a refund. Up to $1,600 of the credit is refundable, meaning the IRS will send it to you even if you owe nothing. The Lifetime Learning Credit is not refundable, so it only helps if you have tax to reduce.

How to report the 1098-T on your return

Your school will send you the 1098-T by January 31 if you paid may have access to expenses. The form shows the amount in Box 1 (may have access to tuition and related expenses) and Box 2 (scholarships or grants). You report these amounts on Form 8863, which calculates which credit you can claim and how much.

If you use tax software, you enter the information from the 1098-T into the education section, and the software determines whether you benefit from American Opportunity or Lifetime Learning. It will also check your income against the phase-out limits and reduce the credit if necessary. You do not file Form 8863 separately; the software includes it in your return.

If you file by hand, you complete Form 8863 yourself, calculate the credit, and enter the result on your Form 1040. The form asks whether you are a dependent, your enrollment status, and your modified adjusted gross income. Answer honestly — the IRS cross-checks this information against what the school reported.

Income limits and how they shrink your refund

The American Opportunity Credit begins to phase out at $80,000 of modified adjusted gross income for single filers and $160,000 for married filing jointly. It disappears entirely at $90,000 and $180,000. The Lifetime Learning Credit phases out at $80,000 to $90,000 (single) and $160,000 to $180,000 (married). If your income falls in the phase-out range, the credit shrinks dollar for dollar.

If you are a dependent, your income is your own income, not your parents'. If your parents claim you as a dependent, they claim the credit on their return using their income. You cannot claim it on your return. This matters if your parents earn above the limit but you earned little or nothing — they still cannot claim the credit because their income is what counts.

The phase-out is calculated on Form 8863 automatically if you use software. If you file by hand, you have to do the math yourself. The IRS instructions for Form 8863 walk through the calculation, but it is straightforward to make mistakes. If your income is close to the limit, double-check your work or have someone review it.

What expenses count and what do not

may have access to expenses are tuition, fees, books, supplies, and equipment required for enrollment. Room and board, transportation, and personal expenses do not count, even if you paid them while in school. The 1098-T reports what the school charged, but scholarships and grants reduce the amount you can claim. If you received a $5,000 scholarship and paid $8,000 in tuition, only $3,000 counts as your expense.

If you paid expenses with a student loan, those count. If you paid with a 529 plan, scholarship, or grant, they do not — the credit is for expenses you paid out of pocket or financed yourself. If you used a Coverdell Education Savings Account, the same rule applies: the credit is only for amounts you paid beyond what the account covered.

Some schools report expenses that do not may have access to for the credit. If the 1098-T includes room and board or other non-may have access to items, you have to subtract them before you claim the credit. The school is required to report what you paid, not what qualifies; it is your job to separate the two.

Choosing between American Opportunity and Lifetime Learning

You can claim only one credit per student per year, not both. The American Opportunity Credit is usually better if the student is in their first four years of a degree program and you have enough tax liability to use it. It is worth up to $2,500 and is partially refundable. The Lifetime Learning Credit is worth up to $2,000 and is not refundable, but it applies to any level of education — graduate school, professional certifications, part-time study.

If you have multiple students, you can claim American Opportunity for one and Lifetime Learning for another in the same year. If you have one student, tax software will calculate which credit produces the larger refund and recommend it. If you file by hand, you have to do the calculation yourself on Form 8863.

The choice also depends on your income. If you are above the phase-out range, neither credit helps. If you are in the phase-out range, the credit shrinks, and you may be better off not claiming it and saving the expenses to claim in a future year when your income is lower. This strategy is called "bunching" and is worth considering if your income fluctuates.

Common mistakes that reduce or eliminate your refund

The most common mistake is claiming expenses your parents paid. If your parents paid your tuition, they claim the credit on their return, not you. If you claim it, the IRS will disallow it and you will owe the tax back, plus interest and penalties. Check with your parents before you file to see who actually paid.

Another mistake is claiming the credit twice — once on your return and once on your parents' return. The IRS will catch this and disallow one of them. If you are a dependent, your parents claim the credit. If you are not a dependent, you claim it. Do not both claim it.

A third mistake is including non-may have access to expenses. If the 1098-T includes room and board or other items that do not may have access to, and you report the full amount, the IRS may reduce the credit or disallow it entirely. Review the 1098-T carefully and subtract anything that does not may have access to before you claim the credit.

Frequently Asked Questions

Can I claim the 1098-T if I did not receive one from my school?

If you paid may have access to expenses and your school did not send you a 1098-T, contact the school's financial aid office. Schools are required to send them by January 31. If the school says you do not may have access to for one, you may still be able to claim the credit if you have documentation of what you paid. Keep receipts and invoices.

What if my school reported the wrong amount on the 1098-T?

Contact your school's financial aid office and ask them to issue a corrected form. Schools sometimes include scholarships or non-may have access to expenses by mistake. Once you have the corrected form, file an amended return if you already filed, or use the corrected amount if you have not yet filed.

Does the 1098-T affect my financial aid for next year?

The 1098-T itself does not affect financial aid. Your FAFSA (Free process for Federal Student Aid) determines aid, and it asks about your income and assets, not about education credits. However, if claiming the credit changes your tax liability, it might affect your income for next year's FAFSA calculation.

Can I claim the credit if I am a graduate student?

You cannot claim the American Opportunity Credit as a graduate student — it is only for the first four years of a degree. You can claim the Lifetime Learning Credit for graduate school, but it is worth only $2,000 and is not refundable. You must have tax liability to benefit from it.

What if my income is above the phase-out limit?

If your income exceeds the limit, you cannot claim the credit that year. Some people reduce their income by making contributions to a traditional IRA or a 401(k) to fall below the limit, but this only works if you have earned income and a plan available. Otherwise, you have to wait for a year when your income is lower.