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The 1098T’s Are Coming, The 1098T’s Are Coming!

If you say the title of this article in the same manner as Paul Revere did when he alerted the colonists that “the British are coming” it is somewhat humorous. Other than that it is just my best attempt to bring light to yet another tax form that you should be expecting to see in your mail if you paid for tuition in the last tax year. In addition, there should only be one lantern in the Old North Church to let you know that the form is coming by land and not by sea. 😉

tax

For those that are not familiar with a 1098-T, I will be happy to give you a brief description. It is a form provided to you by any college that you attended and paid tuition in the last tax year. In box 2 it will reflect the qualified expenses that you incurred and in box 5 it will show all the scholarships and grants that you received. Using this information, you will complete form 8863 to attach to your 1040 and if you encounter any questions you can always refer to Publication 970. Sounds simple enough right?

This year marks a change in the education tax credits in that they allow you to claim more funds than ever before under the Hope Scholarship Credit plan. They are referring to this new plan as the American Opportunity Tax Credit. Basically, it allows you to receive an annual credit for up to $2500 for the first four years of Post-secondary education. (In the past, it was only available for the first 2 years and the Lifetime Learning Credit kicked in after that). This new approach to the education tax credit is only being offered for the 2009 and 2010 tax years but I have high hopes that it will be renewed for subsequent years.

Another feature that the IRS provided clarification on is that they are now allowing books and course materials to be claimed under the new American Opportunity Tax Credit. Since this information will more than likely not be reported on your 1098-T (T stands for tuition), you will want to keep you bookstore receipts to provide proof of your additional expenses over and above tuition.

The Lifetime Learning Credit is still available for undergraduates in their 5th or (gasp…) 6th year and also for graduate students. This tax credit is not as generous as the Hope Credit but it does provide for a credit of up to $2000.

Don’t miss out on these extra dollars. Every penny counts when it comes to paying for education, so you want to make sure you take full advantage of the education tax credits.

If you would like additional information, please feel free to check out the following links:

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  1. […] will not have as much tuition expense to deduct on their taxes using the 1098-T. This is actually a good […]


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