Important Education Tax Credit Information – Form 1098-T

The 1098-T form does not report the payment information needed to claim the educational tax credit. The 1098-T form reports qualified tuition and fee charges (Box 2), scholarships and similar amounts received (Box 5), and any adjustments made during the year to these amounts that were reported on a prior year 1098-T (Box 4 and 6).  Be aware that the tax credit is calculated based on actual payments made for qualified tuition and fee charges, net of amounts reported in the other boxes on the form. In addition to a student's own payment records, a list of payments posted on the student account is available on the student MyPage web site following the directions given below.

1098-T Mailing Status

The 2007 1098-T forms were mailed to students on January 28, 2008.  Per IRS regulations, forms are mailed only to students enrolled in “for Credit” courses.  However, a facsimile of the form, detail information for the amounts reported on the form, and supplemental charge and payment information applicable to all students is currently available via the SLCC-MyPage website using the following directions.

On the SLCC home page, enter your User Name and Password in the MyPage login boxes

Click on the “Student” tab

Under the Student Records heading, click on “Tax Notification 1098-T   Information”

Enter 2007 for the Tax Year and Click “Submit”

(A prior year 1098-T and related detail information is also available by entering a different “year”.)

Description of Credits and Additional Information (link to next page)

Form 1098-T Information (Boxes 2 and 5)

The 1098-T form provides information for students when claiming an education tax credit against their 2007 federal income tax liability.  The form reports total “qualified charges” in Box 2 (meaning tuition, student fees and course fees for courses taken for credit, plus  graduation application fees) charged in 2007 for semesters held in 2007.  However, it excludes charges for the 2007 Spring semester if a student registered for “credit courses” in December, 2006.  The charges for registrations in December 2006 were reported in advance on the 2006 1098-T.  Likewise, the 2007 1098-T includes charges for the 2008 Spring semester if a student registered for “credit classes” in December, 2007 (Box 7 would be checked).  Spring 2007 semester charges reported on the 2006 1098-T can be found on MyPage under “Tax Year” 2006.

The 1098-T also reports any scholarships, grants, waivers or sponsor amounts in Box 5 that were received by the student during the year.  The form does not report student payments made during 2007; however, payment detail can be found via the internet on the 1098-T information page following the directions given above.

Prior Year Adjustments (Boxes 4 and 6)

Colleges are required to report adjustments to prior year qualified tuition and fees and scholarships if those adjustments occurred during 2007.  Any adjustments that would have increased your prior year qualified tuition and fees or scholarships are included with the current year reporting in boxes 2 and 5 and should be included with your current year tax credit calculation.  However, any adjustments that would have decreased your prior year qualified tuition and fees or scholarships are reported in boxes 4 and 6.  These adjustments require a recalculation of your prior year tax credit with the difference in the tax being included on your current year tax Form 1040, line 49 or Form 1040A, line 31; which affects the current year tax liability.  Next to the line, write ECR to alert the IRS that you have a prior year education credit adjustment.

IRS Publications and Forms

Only qualified charges that were actually “paid” in 2007 can be claimed for the credit.  It is the taxpayer’s responsibility to determine and calculate the appropriate tax credit or deduction he or she may be eligible to claim on their 2007 federal income tax return.  Specific information and instructions can be found on the IRS web site:

IRS Form 8863 Education Credits (http://www.irs.gov/pub/irs-pdf/f8863.pdf)

IRS Publication 970 Tax Benefits for Education (http://www.irs.gov/pub/irs-pdf/p970.pdf)

Please consult the IRS regulations and instructions and/or a tax professional for assistance in claiming your education credits and calculating and reporting any increase in tax liability arising from a prior year adjustment to your account.

(Link from prior page) HOPE SCHOLARSHIP AND LIFETIME LEARNING TAX CREDITS

The 1098-T mailed to you reports the amounts of qualified tuition and fees charged to you for the 2007 calendar year not the amounts paid by you.  You will need to consult your records to determine how much of the amounts reported to the IRS were actually paid by you.  However, detail information about a student’s charges, scholarships, and any adjustments to prior year reported amounts, and a list of payments made during the year are available on the SLCC web site to assist you in calculating your credit.  To find this information, navigate to www.slcc.edu on your browser.  From there, follow the steps below:

On the SLCC home page, enter your User Name and Password in the MyPage login boxes,

Click on the “Student” tab,

Under the Student Records heading, click on “Tax Notification 1098-T Information”,

Enter 2007 for the Tax Year and Click “Submit”.

(A prior year 1098-T and related detail information is also available by entering a different “year”.)

There are two tax credits for qualifying higher education expenses:  The Hope credit and the Lifetime Learning credit.  Both credits are claimed by filing Form 8863 with your federal income tax return.  A key difference is that the Hope credit is available only for the first two years of pursuing a degree at a post-secondary institution, whereas the lifetime learning credit is available for any year of post-secondary education and for non-degree courses, such as classes to acquire or improve job skills.  You may not claim both credits for the same student for the same year.

If you pay qualifying higher education expenses for yourself, your spouse, or a person you claim as a dependent on your return, you may be eligible to claim a credit on Form 8863.  However, the Hope credit may be claimed only twice for each student.  If you are married, you must file a joint return to claim either education credit.  In addition, the tax credit is limited by the amount of your total tax liability on your return.

In order to claim the Hope tax credit, the student must be (1) enrolled at least half-time for at least one semester, (2) must be in his/her first two years of school, (3) must be pursuing a degree, and (4) cannot have been convicted of a felony for possession or distribution of a controlled substance.  The credit is 100% of the first $1,100 of qualified tuition and fees and 50% of the next $1,100 of qualified tuition and fees for a maximum credit of $1,650.

The Lifetime Learning credit does not have the same requirements as the Hope credit.  In order to claim the Lifetime Learning credit, the student must be enrolled in a course or courses that give or improve job skills including courses taken toward obtaining a degree at a qualified institution.  The amount of the credit is 20% of the first $10,000 of qualified tuition and fees for a maximum credit of $2,000 per tax return for 2007.  This credit is per tax return, not per student. 

Salt Lake Community College cannot determine if you qualify for one of these tax credits or the amount of the credit due you.  Please consult a tax professional for assistance in calculating and claiming your credit.  IRS Publication 970, Tax Benefits for Education and IRS Form 8863 provide more information regarding these credits and can be obtained from the IRS web site at http://www.irs.gov/pub/irs-pdf/p970.pdf and http://www.irs.gov/pub/irs-pdf/f8863.pdf respectively.

If you have an amount in boxes 4 or 6, you may need to recalculate your tax credit for the prior year reducing the qualified expenses or the grants and scholarships by the amounts in the boxes.  You would then include the amount as an additional tax on your 2007 return.  Please consult the IRS instructions or a tax professional for assistance in calculating and reporting the additional tax due to the adjustment in your qualified expenses or your grants and scholarships.

TUITION AND FEES ABOVE-THE-LINE DEDUCTION

If your income does not exceed specified ceilings and you choose not to take one of the education credits for qualified tuition and fees, you may be able to deduct up to $2,000 or $4,000 from your Adjusted Gross Income without having to itemize deductions.  The amount of the deduction is dependent upon the amount of your modified adjusted gross income.  The deduction has the same requirements as the Lifetime Learning credit in that the expenses must be for classes at a qualified institution and must give or improve job skills.  Consult a tax professional for assistance in determining which tax credit or deduction is the most advantageous for you and in calculating and claiming your credit or deduction.