1098-T FormEach year that a student is enrolled in college, you will need to complete the 1098-T form. Every student should receive this form by January 30, 2022, and it will be sent to you by your education institution. According to the IRS, the form will detail:
Education Tax CreditsThere are two types of education tax credits: the Lifetime Learning Credit and American Opportunity Credit.
Student Loan DeductionEducation tax credits are not limited to those who are currently enrolled in school or a career development program. You are eligible to deduct on the interest you pay for qualifying student loans. Filers can claim up to $2,500 in student loan deductions or up to the amount of interest actually paid. In order to be eligible, your modified adjusted gross income cannot exceed $85,000 ($170,000 if married filing jointly). Also, the deduction is reduced when your modified adjusted income is between $70,000 and $85,000 when filing as single, head of household, or qualifying widower (and between $140,000 and $170,000 for filing married filing jointly).
Emergency Financial Aid Grants and Tuition and Fees DeductionOver the last year, many students and their families have qualified for emergency financial aid grants under the CARES Act, the Coronavirus Response and Relief Act 2021, and the American Rescue Plan Act of 2021. For tax filing purposes, these emergency grants to not count as income. The IRS also states that “a student does not reduce an amount of qualified tuition and related expenses by the amount of an emergency financial aid grant.”
Finally, for the past few years, students and families have been able to take advantage of the tuition and fees deduction. According to the IRS, this tax benefit was repealed under the Taxpayer Certainty and Disaster Tax Relief Act of 2020. For further information, see the IRS Tax Benefits for Education Publication 970.