The Internal Revenue Code provides both tax credits and deductions that may be taken to reduce the federal income tax burden for students, or those paying the costs of a student's higher education. Credits directly reduce the amount of income tax owed, while deductions reduce the amount of taxable income upon which taxes are computed.
University reporting of expenses and aid received
Federal legislation1 requires reporting Qualified Tuition and Related Expenses (QTRE) payments received in Box 1 of the 1098-T IRS tax Form, rather than reporting the amount billed in Box 2, as the University has traditionally done. The University of Washington has implemented this change for the tax year ending December 31, 2018
Per IRS regulation*, the UW reports all tuition payments, financial aid, grant or scholarship payment information for students on the 1098T with the detail information from the student's acount on the UW layout format. This 1098T information is reported for the current calendar year only. Amounts prepaid for future quarters/years will not be reported. Expenses for books, supplies and/or equipment are not reported to the IRS. Students must keep the receipts and report these expenses when filing a tax return.
Obtaining your 1098T information
The University of Washington will mail you an IRS Form 1098T at the end of January. If you are registered for Winter quarter, the form will be mailed to your local address. Otherwise, it will be sent to your permanent address. You may also print the information contained on the 1098T from MyUW Student Finances tab. As you do not submit this form to the IRS, an official form is not necessary to claim the tax credits.
For information on the box # on the 1098T form, please read the instructions from the IRS.
Claiming the credits
Use IRS Form 8863 to determine the amount of the credit. Be sure to read the instructions that accompany the form.
If you need further assistance, contact the IRS or a tax advisor. The University cannot provide assistance regarding your eligibility and/or the calculation of the credit.
To learn more about education tax credits and eligibility, please visit the IRS website or links below:
- American Opportunity Tax Credit (AOTC)
- Lifetime Learning Credit (LLC)
- Education Credits – AOTC and LLC
- Qualified Education Expenses
- Compare Educational Credits
- Student Loan Interest
- Tuition and Fees Deduction
- No Double Benefits Allowed
Education Savings Account (ESA)
Taxpayers can invest up to $2,000 a year for each child under age 18. All earnings are entirely tax free, if they are used to finance a higher education. Please review IRS publication 970 for specific information.
The Internal Revenue Code allows people under the age of 59 1/2 to withdraw money for higher education expenses from a regular IRA or the new Roth IRA without paying a penalty for early distribution. However, tax may be owed on at least part of the amount distributed. These funds may be used for the taxpayer's own higher education expenses, or for those of their spouse,
Other Useful Resources
- SFS Tax Workshop Presentation
- National Association of Student Financial Aid Administrators (NASFAA)
- IRS - Tax Information for Students
- IRS Tax Topic - Tax Credits
- IRS Publication 970 - Tax Benefits for Education
- IRS Publication 17, Ch. 35 - Education Credits