Useful info for 1098-T

mcat2
Mon, 28 Mar 2016 18:30:03 +0000

Another relevant info.

(BTW, the questions about 1098-T and its use for American Opportunity or Lifetime Learning Education Credit have been discussed many times here on CC. So look them up. It may have been discussed too many times. This only points to the fact that this is indeed very confusing to parents and students.)

From IRS Publication 970:
(Especially, pay close attention to the phrase “…or in the first 3 months of 2016” when reporting the tax for the 2015 tax year. I think this is how the tax code is “hacked” by IRS (in order to “remedy” the “sloppy job” that the college does when it prepares the 1098-T) so that it can be better used by the tax payer. But an issue (which you yourself need to take care without relying on the info in 1098-T only) here is that the school gives you the financial transactions in the first 3 months of 2016 too late (one year late) in 1098-T: It will send you the financial transaction information for the 3 months: Jan. to March of 2016 in your 2015 tax year 1098-T only at the end of Jan. of 2017! This is why you need to log in and look up your billing/payment history at the school to find the info for these 3 months: Jan. to March. of 2016 by yourself, instead of relying on the info for your 2015 tax year 1098-T which you received at the end of Jan. in 2016.)

"What Expenses Qualify?

The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2015 for an academic period beginning in 2015 or in the first 3 months of 2016."

For example, if you paid $1,500 in December 2015 for qualified tuition for the spring 2016 semester beginning in January 2016, you may be able to use that $1,500 in figuring your 2015 credit.
What that means is if you paid in Nov 2014, you could have claimed the credit on your 2014 tax return, not your 2015 return.

You can only claim, say, AOTC, for 4 years. You need to deal with this issue “holistically” in the sense of looking at the tax issues in 4 years.

As an example:

Suppose that you entered the college in the fall of 2011. The 4 years you want to use AOTC is then the tax years 2011, 2012, 2013, and 2014 (but not the 2015 tax year, when you graduate.)

In 2011, you use the payment and qualified education expenses for the whole year (in reality, only the 2nd half of the year) and the spring semester in 2015 (because that spring semester begins in the first 3 months of the NEXT year of the 2011 tax year.) Note that even though 1098-T you receives in Jan. of 2012 may not include ALL information for two semesters in ypur freshman year, you need to find all financial transactions for the year 2011 as well as the spring semester in 2012 (because it falls into the description of “the semester that begins in the next 3 month of the next year of the tax year 2011.”)

Ditto for the year: 2012, 2013, 2014.

Then, for the tax year, 2015 (the tax year when you graduate in its summer), you can no longer use AOTC because you have used AOTC for the previous 4 tax years.

Read what I wrote here with a large grain of salt, because I am not qualified to have a “final word” about this matter.