Form 1098-T is a tuition statement that colleges and universities are required to provide. The 1098-T shows “payments received for qualified tuition and related expenses” and scholarships received, provided they either came from the college or were disbursed directly to the college.
Form 1098-T is used for two purposes:
- To verify tuition expenses for taxpayers claiming the AOTC or LLC.
- To confirm that a 529 plan distribution was qualified.
If you’re claiming the AOTC, you’ll need the 1098-T to fill out IRS Form 8863. Even though the 1098-T has the student’s SSN, you’ll use it for your own tax return for the AOTC.
If you are not claiming the AOTC, you’ll still want to hang onto your 1098-T, especially if you withdrew funds from a 529 plan. If the 529 distribution went to the student, good news: the 1099 from the 529 will have the same SSN as the 1098-T. As long as all distributions were qualified, nothing needs to be reported—neither the distribution nor the 1098-T. If the 529 distribution went to the parent, you may receive an IRS letter because there is no 1098-T with the same SSN as the 1099 from the 529, in which case you’ll respond to the letter with the 1098-T.
Remember that 529 plans can be used for a greater range of expenses than will show up on the 1098-T. These include room and board and books and required supplies. Families should keep receipts for these expenses if they were paid for with 529 funds in the event of an audit.