Adding a 1098-T to your return can increase your refund, but only if you meet specific conditions and haven't already claimed education credits on a prior return
The 1098-T form reports may have access to education expenses paid during the tax year. When you include it on your return, you may claim either the American Opportunity Tax Credit (up to $2,500 per student) or the Lifetime Learning Credit (up to $2,000 per return), depending on which you're may be able to access for. These credits reduce your tax bill directly, which can increase your refund if you're owed one or create a refund if you otherwise wouldn't have one.
The catch: you can only claim one credit per student per year, and you cannot claim a credit for expenses you've already paid with money from a 529 plan, Coverdell account, or scholarship. If you're claiming the American Opportunity Credit and your income is below certain thresholds, you may also receive a refundable portion—meaning the IRS sends you money even if you owe no tax.
Whether adding the 1098-T actually increases your refund depends on your total income, whether you're already claiming other credits, and which education credit you choose. A tax professional or the IRS Free File tools can show you the difference before you file.
Key Takeaways
- The 1098-T unlocks education credits worth $2,000 to $2,500 per student, which reduce your tax bill and can increase your refund.
- You cannot claim an education credit for expenses paid with scholarship money, grants, 529 distributions, or Coverdell account withdrawals.
- The American Opportunity Credit is partially refundable (up to $1,000 may come back to you as a refund), while the Lifetime Learning Credit is not refundable.
- Your income level determines whether you can claim either credit at all, and income thresholds vary by filing status.
- If you claimed an education credit on a prior year return for the same student, you cannot claim it again for overlapping tax years.
When the 1098-T actually increases your refund
Adding the 1098-T increases your refund in two scenarios. First, if you owe federal income tax and claim an education credit, your tax bill shrinks, leaving more money to refund to you. Second, if you claim the American Opportunity Credit and your income is low enough, up to $1,000 of that credit is refundable—the IRS sends it to you even if you owe zero tax.
The refundable portion of the American Opportunity Credit phases out as your income rises. For the 2023 tax year, if you file single and earn more than $90,000, or file married filing jointly and earn more than $180,000, none of the credit is refundable. The Lifetime Learning Credit is never refundable, so it can only reduce your tax bill, not create a refund.
If you're already claiming other credits—the Earned Income Tax Credit, Child Tax Credit, or others—adding the 1098-T may not increase your refund at all, because you've already reduced your tax bill to zero or near it. The order in which credits are applied matters, and tax software will calculate this automatically.
Expenses that do and do not may have access to for the 1098-T
The 1098-T reports tuition and required fees paid to an may be able to access school. may have access to expenses include tuition, mandatory student fees, and course materials required by the school (textbooks, supplies, equipment). Room and board, transportation, personal expenses, and optional fees do not count.
Critically, you cannot claim a credit for any portion of these expenses paid with tax-information programs: scholarships, grants, Pell Grants, employer-provided educational information, or distributions from a 529 plan or Coverdell Education Savings Account. If your 1098-T shows $10,000 in expenses but you paid $4,000 of it with a scholarship, only $6,000 qualifies for the credit calculation.
The school reports what it received from you on the 1098-T, not what you actually paid out of pocket. If you received a scholarship that the school applied directly to your bill, the 1098-T will show a lower figure. You must account for this when you file, or you'll overstate your expenses and claim a credit you're not may have access to to.
Income limits that can disqualify you
Both education credits phase out at higher income levels. For the 2023 tax year, the American Opportunity Credit begins to phase out at $80,000 for single filers and $160,000 for married filing jointly. The Lifetime Learning Credit phases out at $80,000 single and $160,000 married filing jointly. These thresholds adjust annually for inflation.
If your modified adjusted gross income (MAGI) exceeds the upper limit for your filing status, you cannot claim either credit. MAGI is usually your adjusted gross income, but some types of income (like foreign earned income) can change it. The IRS worksheet in the instructions for Form 8863 walks you through the calculation.
If you're over the income limit for one credit, you may still may have access to for the other—they have the same thresholds, but it's worth checking both. If you're married and file separately, neither of you can claim an education credit, even if your individual incomes are below the limit.
The difference between American Opportunity and Lifetime Learning credits
| Feature | American Opportunity Credit | Lifetime Learning Credit |
|---|---|---|
| Maximum credit per student | $2,500 | $2,000 per return (not per student) |
| Refundable portion | Up to $1,000 (40% of credit) | None—non-refundable |
| Student requirements | Enrolled at least half-time in first four years of college | Any year of college or graduate school; part-time or full-time |
| Expenses covered | Tuition, fees, course materials (books, supplies) | Tuition and fees only (not course materials) |
| Can claim both in same year? | No—one per student per year | No—one per student per year |
The American Opportunity Credit is usually the better choice if the student is in their first four years of college and enrolled at least half-time, because it's partially refundable and covers course materials. The Lifetime Learning Credit works for graduate students, part-time students, or students beyond their fourth year, but it's not refundable and doesn't cover books.
You cannot claim both credits for the same student in the same year. If you have multiple students, you can claim the American Opportunity Credit for one and the Lifetime Learning Credit for another in the same tax year, but not both for the same person.
How to report the 1098-T on your return
The school sends you the 1098-T by January 31 of the year after the tax year ends. You'll receive Copy 2 (for your records) and the IRS receives Copy 1. The form shows the may have access to education expenses in Box 1 and scholarships or grants in Box 5. You use these figures to complete Form 8863 (Education Credits), which then feeds into your main tax return.
If you file electronically using tax software, you enter the 1098-T information into the education section, and the software calculates which credit you may have access to for and applies it automatically. If you file by paper, you must complete Form 8863 yourself and attach it to your return. The form includes worksheets to determine your MAGI, figure out which credit to claim, and calculate the refundable portion if applicable.
If the school did not send you a 1098-T but you paid may have access to expenses, you can still claim the credit—you'll need to gather receipts, tuition statements, and proof of payment. However, if the school issued a 1098-T, you must use the figures on that form, even if they differ from what you paid.
Common reasons the 1098-T doesn't increase your refund
You've already claimed the credit in a prior year for the same student. Education credits can only be claimed once per student per tax year, and you cannot claim the same credit for overlapping years. If your child attended college in 2022 and 2023, you can claim a credit for each year, but not both years on the same return.
Your income exceeds the phase-out limit. If you earn above the threshold for your filing status, you cannot claim any education credit, regardless of the 1098-T. This is an all-or-nothing rule—there's no partial credit if you're over the limit.
The expenses were paid with tax-information programs. If a scholarship, grant, or 529 distribution covered the tuition, you cannot claim a credit for that portion. The 1098-T may show the full amount, but you must reduce it by the tax-free funds before calculating the credit.
You're claiming the Lifetime Learning Credit and already have a large tax bill reduction from other credits. The Lifetime Learning Credit is non-refundable, so it can only reduce your tax to zero. If other credits have already done that, the Lifetime Learning Credit adds nothing to your refund.
Frequently Asked Questions
Can I claim the 1098-T if my parents claim me as a dependent?
No. Only the person who paid the may have access to education expenses can claim the credit. If your parents paid your tuition, they claim the credit on their return, not you. If you paid it yourself (with your own money, loans, or work-study), you can claim it on your return, even if they claim you as a dependent.
What if I paid tuition in December 2023 but the school didn't send the 1098-T until February 2024?
You report the expenses on your 2023 tax return (filed in 2024) based on when you paid them, not when you received the form. If you paid in December 2023, it goes on your 2023 return. The 1098-T is just documentation; you can file before receiving it and amend later if the figures differ.
If I take a student loan, does that count as a may have access to expense for the 1098-T credit?
No. A student loan is borrowed money, not money you paid out of pocket. Only actual payments for tuition and fees count. However, you may be able to deduct student loan interest (up to $2,500 per year) on a separate line of your return, even if you don't claim an education credit.
Can I claim the 1098-T if my child dropped out mid-semester?
Yes, as long as the child was enrolled at least half-time when the expenses were paid (for the American Opportunity Credit) or was enrolled at any point during the year (for the Lifetime Learning Credit). Dropping out later doesn't disqualify you from claiming the credit for the semester they attended.
What happens if the 1098-T shows expenses I didn't actually pay?
Contact the school and ask them to issue a corrected 1098-T (Form 1098-T with an X in the "Corrected" box). If they don't correct it, you can still file your return using the actual amount you paid, but keep your receipts and tuition statements in case the IRS questions it. The IRS matches 1098-T data to returns, so discrepancies may trigger a notice.