Financial Friday: What’s Form 1098-T
This month, you will get a Form 1098-T from the university that tells you how much you were billed (Box 2) or paid (Box 1) in tuition and fees last year.
Either your tax accountant or your parents’ (if you are claimed as a dependent on their tax return) will use this number, and other numbers that you give them to prepare your taxes. This form is important because most of your qualifying expenses for tax breaks probably arose from tuition and fees, and this form gives you an idea of how much these were.
This form is not enough, though. You will also need to gather the amounts that you received in scholarships and grants, and the amount that you spent on books and required equipment for last year. Now is a good time to get those receipts together.
You or your parents may reduce the amount of income tax owed by taking these benefits for higher education. You can deduct such things as student-loan interest and cash in saving bonds for education costs without having to pay tax on the interest.
The tax aspects are complicated, but you’re smart, so if you want to give this a try, see IRS Publication 970.
Valrie Chambers, Ph.D., professor of accounting, and Betty Thorne, Ph.D., professor of statistics and the Christian R. Lindback Chair of Business Administration, write Financial Fridays to bolster students’ financial wellness including preventing financial mistakes, safeguarding their assets and identity, and thinking critically about financial decisions.