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Tax Payer Relief Act (1098-T)

The Tax Payer Relief Act of 1997 created a number of new education tax incentives, including the Hope Scholarship and Lifelong Learning tax credits, and a limited deduction for interest paid on student loan repayments.  

In January, you will receive an e-mail notification from University Accounting Service (UAS), inform@getmydocument.com, with information on how to obtain your 1098-T document from the University.

The 1098T tax form contains important tax information related to tuition and other information for the calendar year that may be needed to complete your tax return and obtain Federal and State tax benefits.

To view the document, go to the UAS site, www.getmydocument.com and follow the instructions to receive your document. For information regarding downloading your form, please contact UAS at (800) 756-4311. For information regarding the data on your 1098T form, please contact the UW Oshkosh Student Accounts Office at (920) 424-1332 or sa@uwosh.edu.

The IRS has made the following statement regarding payments and their potential applicability to the Hope Scholarship Credit :

  • The Hope Scholarship Credit may be claimed for payments to qualified tuition and related expenses made on or after January 1, 1999. Therefore, for example, taxpayers will be able to claim the credit when they file their 1999 tax returns in 2000.

  • The term "qualified tuition and related expenses" means the tuition and fees an individual is required to pay in order to be enrolled at or attend an eligible institution. Amounts paid for any course or other education involving sports, games, or hobbies are not eligible for the credit, unless the course or other education is part of the student's degree program. Charges and fees associated with room, board, student activities, athletics, insurance, books, equipment transportation, and similar personal, living and family expenses are not qualified tuition or related expenses.

  • Financial aid grants and scholarships will be used to reduce the qualified tuition and related expenses and may result in no tax credit. Loans, i.e., Perkins, Stafford or personal do not count toward the reduction of the qualified tuition and related expenses. Each student will have to review the amount of qualified tuition and related expenses paid and the amount of financial aid that offsets that cost during 1998.

If you have questions, please consult your personal tax adviser or the IRS. You can call the IRS Office of Public Liaison, (202) 622-2970, or visit the IRS Web site.

Sorry, the University CANNOT provide tax advice.


New Tax Credits

Several new tax benefits are available to help families meet the cost of post-secondary education. These tax benefits are intended to help students and their parents as well as all working Americans to fulfill a variety of educational objectives.

Taxpayers can claim one, or in some cases, two new tax credits for expenses they pay for post-secondary education for themselves and their dependent children. These tax credits can directly reduce the amount of federal income tax for returns filed in 1999 or later. The Hope Scholarship Credit is available on a per-student basis for the first two years of post-secondary education, while the Lifetime Learning Credit applies on a tax-return bases and covers a broader time frame and range of educational courses. Education expenses paid for with tax-free grants, scholarships, and employer-education assistance are not eligible for either tax credit. Education expenses paid with loans are eligible for these tax credits.

 

Hope Scholarship Credit

A tax credit equal to all of the first $1,000 of tuition and fees, Oess scholarships, grants, and tax-free tuition benefits and half of the next $1,000 of tuition and fees is available to parents of dependent students or to students who are not claimed as dependents on their parents' return. The maximum credit of $1,500 will increase for inflation after 2001. The Hope credit can be claimed only for two tax years and applied only to the first two years of post-secondary education. Students must be enrolled at least half-time during at least one academic period that beings during a tax year and cannot have had a drug felony conviction in a year that the credit applies. Education expenses paid on or after January 1, 1998, are eligible for the Hope credit.

 

Lifetime Learning Credit

This credit applies to tuition and fees for undergraduate, graduate, and continuing-education course work. A family can claim on its tax return a credit equal to 20% of $5,000 of educational expenses; so the maximum benefit is $1,000 each tax year. Eligible education expenses are offset by scholarships, grants, and other tax-free tuition benefits. Starting in 2003, the amount of eligible education expenses increases to $10,000, resulting in a $2,000 maximum tax credit. Education expenses paid on or after July 1, 1998, are eligible for the Lifetime Learning credit.

 

Who is eligible for the Education Tax Credit?

The full value of both education tax credits is available to married taxpayers filing jointly with an adjusted gross income (AGI of $80,000 or less and to single taxpayers with an AGI of $40,000 or less. The tax credits phase out gradually. Once married taxpayers' AGI exceeds $100,000 or single taxpayers' AGI exceeds $50,000, they are not eligible for these credits. The income limits will be adjusted for inflation after 2001. Also, taxpayers cannot use both credits for the same student in a single year nor may they combine these credits with tax-free withdrawals from education IRA's. Individuals should save their records of tuition and financial aid for tax purposes. Colleges and universities will need to collect social security numbers from all students so they can issue information reports to assist families when they file their taxes.  

 

Tax Credit
Types of Classes Eligible

Hope Scholarship

First two years of undergraduate (status as of January 1)

Lifetime Learning

Undergraduate, graduate and individual courses


Example

In the fall of 1998, Tom's wife Jessica, returns to school when their son Mike starts at a community college. Their daughter Amy completes her second year in the spring of 1998 and returns to her private college for her junior year. When Tom and Jessica file their tax return for 1998, they can claim a $1,250 Hope credit for Mike based on his $1,500 tuition, a $1,500 Hope credit for Amy based on her second semester sophomore year tuition of $6,000, and a $200 Lifetime Learning credit based on the $1,000 tuition for Jessica's part-time graduate courses. The family's total education tax credits equal $2,950.

 

Tom & Jessica's Tax Credits in 1998

Mike

$1,000 + (50% of $500) =

$1,250

Amy

$1,000 + (50% of $1,000) =

$1,500

Jessica

20% of $1,000 =

$200

TOTAL CREDIT

 

$2,950


If Tom's family continues their studies in the following year, the total education tax credit for 1999 equals $2,250. It will be lower than in 1998 because they cannot claim the Hope credit for Amy's junior year.  However, her tuition costs are eligible for a Lifetime Learning credit. Amy's and Jessica's combined tuition exceeds the $5,000 cap.

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by fochsm last modified Feb 17, 2010 04:33 PM