I received an email from accounts receivable at son’s school today. Son is a freshman and I really don’t know what a 1098-T is, or how even having a college student affects our taxes. We file the 1040A. Can anyone please shed some light on what this actually means? Thank you!
Important Upcoming IRS Regulatory Changes for 2018 1098-T Reporting:
2017 1098-T
Reported Amounts billed for qualified tuition and related expenses in Box 2
(same as in prior years)
2018 1098-T
Will report Payments received for qualified tuition and related expenses in
Box 1
IRS Regulations require Iowa State University (and all universities) to
report Box 1
Box 2 (amounts billed) reporting is no longer allowed
If you elect to make payments for Spring 2018 tuition and related expenses in
December 2017, you will not receive the tax benefit as reported on the 1098-T
for 2017 or 2018. Please consult your tax advisor.
This information is pertinent for students filing independently and/or
families claiming their student(s) as a dependent.
Iowa State University governs the application of payments towards university
charges. The application of payment is non-negotiable.
In the past the school could either use box 1 or 2 to report billed qualified tuition and related fees or paid qualified tuition and related fees during a specified year.
Now apparently in 2018 they are required to report paid amount in box 2.
You need a 1098T to be able to claim an American Opportunity Tax credit.
This is an education credit a married filing jointly couple with MAGI up to $160,000 can claim on up to $4,000 of qualified education expenses. The maximum credit is $2,500 and up to 40% or $1,000 is refundable.
There is talk of new tax proposals so some of this might be affected.
I am not sure why they are saying that if you pay spring charges in December, you cannot a credit for them in 2017 (or 2018).
I thought if they were paid in 2017 they could be claimed for the credit in 2017.
for 2017 or 2018. It’s saying you will not have that amount paid in 2017 for 2018 will not be reflected on the form. I think you can still take the amount in the year paid (like always)
Honestly, the 1098-T have never been correct for my kids so I keep track of anything bill and anything paid in that tax year. I pay no attention to the ‘man behind the curtain’ (form 1098-t). I don’t pay anything in December for the spring semester. I made this decision in the first year because all the grants and scholarships are posted AFTER 1/1, so I just keep every semester in the tax year for that semester. My kids don’t even buy their books early for the spring.
To OP, you may be eligible for the AOTC. You can only take it for 4 years, so many have to decide whether to take the credit for the first (fall) semester or the final (spring) semester. Most kids go to 4 years of college in 5 tax years.
^^The tax proposal would allow the AOTC for 5 calendar years with up to $2500 each year for 4 calendar years and up to $1250 for the 5th calendar year.
Thank you all for your help! We won’t be paying Spring 2017 tuition until Jan, so it doesn’t sound like the change to the form will really affect us.
I’m completely new to this whole AOTC thing. I will have to do some reading before tax time…
Oh I think I understand now. Since the 2017 1098T only reports billed amounts, they mean if you pay spring 2018 charges in Dec 17 then it will not be reported under paid amounts on the 2017 form and of course also not on the 2018 form (since it was paid in 2017).
I agree for a school that bills for Fall (posts aid) in one year and for Spring in another year, it is best to match the payments to each semester/year.
I will have to call my D’s school.
So far both semesters of billed tuition and fees, and scholarships and grants were always reported on one 1098T for one year (school bills in July and Nov, bill is due in Aug and Dec, aid posts 10 days before semester starts so Aug 18 and Dec 23).
So for 2015/16 year they reported fall 15 and spring 16 semester on the 2015 1098T in box 1 and 5.
Same for 2016/17 on the 2016 1098T.
I wonder if they will still report it the same way on the 2017 1098T for 2017/18 and then just report the paid amount on the 2018 1098T, instead of billed amount but keep the reporting for both semesters on the same 1098T.
Thank you @mommdc for the link to the irs publication!
I did a quick read and looked at son’s fall tuition bill. So the only thing that counts is actual tuition and books? I see room and board does not count.
What about the many fees?
Standard Technology Fee $130.00
Health Fee $120.00
Activity & Service Fee $331.95
Health Facility Fee $8.00
Records Fee $130.00
His fall tuition was $10,646.00. He received $9635.00 in scholarships and grants. That leaves $1011. Maybe it would be better to wait until Spring 2018 to start claiming the credit if we only get 4 tax years (as of now)?
Tuition will be going up, he will have a differential when he starts his program, plus one of the $3k scholarships he has to reapply for each year, so no guaranty.
Different tax programs have different definitions of what counts as a qualified education expense, so you need to be careful in specifying which tax program you are asking about. Room and board is not a qualifying expense for the American Opportunity Tax Credit, but certain mandatory fees may count as a qualified education expense.
Related expenses. Student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance.
Strongly advise against this. Usually, you want to take any tax credit as soon as you are eligible to do so, because you never know how long it will be around. Also, as mentioned in a previous post, part of the tax bill currently under consideration would extend the AOTC to five tax years from the current four year limit. Giving up a year of eligibility makes no sense. If for some reason you choose not to take the AOTC for tax year 2017, check and see if you can take the Lifetime Learning Credit for 2017 instead. You cannot take both credits for the same student in the same year, and part of the new tax proposal is to eliminate the LLC after 2017. The LLC is provides a lower maximum credit than the AOTC, so if you’re eligible to take either credit in most cases it would be to your benefit to take the AOTC.
One thing I have been doing is if I have 529 withdrawals that have not been used yet in the current year, I will pay part of the Spring 2018 bill in December to cover those withdrawals.
Another reason to do this is to get the AOTC. If you paid your whole bill from your 529 plan, you are not eligible for the AOTC because you do not have $4,000 of qualifying educational expenses. If you pay $4,000 of your Spring 2018 bill in Dec 2017, you would qualify for the AOTC in 2017 in that case.
These strategies are independent of the amount reported on the 1098-T for 2017.