A 1098-T can increase your refund, but only if you have a tax bill to reduce

The 1098-T form reports education expenses you paid during the year — tuition, fees, course materials, and room and board for students. The IRS uses this form to calculate two education tax credits: the American Opportunity Tax Credit (up to $2,500 per student) and the Lifetime Learning Credit (up to $2,000 per return). If you have a 1098-T and you meet the requirements, these credits reduce the federal income tax you owe, which can increase your refund if you've had taxes withheld from paychecks or made estimated payments.

The key word is reduce. A credit is not the same as a deduction. A deduction lowers your taxable income; a credit directly lowers the tax you owe. If you owe $3,000 in federal tax and you claim a $2,500 education credit, you now owe $500. If you already had $2,800 withheld from your paychecks, your refund goes from $200 (the difference) to $2,300 (the difference after the credit is applied).

Key Takeaways

  • A 1098-T increases your refund only if you have federal income tax withheld or paid during the year; without withholding, the credit may not help you.
  • The American Opportunity Tax Credit is worth up to $2,500 per student and is the larger of the two education credits for most people.
  • You must be claimed as a dependent on someone else's return to use the education credits; if you claim yourself, the person who paid the tuition may be able to use the credit instead.
  • The school must send you a 1098-T by January 31, but you can still claim the credit if the form is late or missing — you just need documentation of what you paid.
  • If your income is too high, the credit phases out and may not be available to you, even if you received a 1098-T.

How the American Opportunity Tax Credit works with your refund

The American Opportunity Tax Credit is the education credit most people use because it covers the widest range of expenses and is worth the most. For the 2023 tax year, it is worth up to $2,500 per student, and up to $1,000 of that credit is refundable — meaning you can get it back as a refund even if you owe no tax at all.

Here is the math: if you are a dependent student with no income of your own, you have no tax bill. But if your parent claims you and also pays your tuition, your parent can claim the credit on their return. If your parent owes $1,800 in federal tax and claims a $2,500 American Opportunity Credit, the credit wipes out the $1,800 and leaves $700 unused. Of that $700, up to $1,000 of the credit is refundable, so your parent gets a $700 refund from the unused portion. Without the credit, they would have owed $1,800.

The Lifetime Learning Credit works the same way but is worth less — up to $2,000 per return, not per student, and none of it is refundable. You can claim one or the other for each student, but not both in the same year.

Income limits that can eliminate the credit

The education credits phase out at higher income levels. For the 2023 tax year, the American Opportunity Credit begins to phase out at $80,000 of modified adjusted gross income (MAGI) for single filers and $160,000 for married filing jointly. The Lifetime Learning Credit phases out at $80,000 (single) and $160,000 (married filing jointly). If your income exceeds these thresholds, the credit shrinks or disappears entirely.

Modified adjusted gross income is not the same as your regular income. It includes certain items the IRS adds back in, such as foreign earned income and student loan interest deductions. If you are close to the income limit, you may want to calculate your MAGI before you file to know whether the credit will be available to you.

When you cannot use the 1098-T because you are not a dependent

If you are a student who pays your own tuition and you claim yourself on your tax return (not claimed as a dependent by a parent), you can use the education credits. But if your parent claims you as a dependent, you cannot claim the credits yourself — your parent must claim them instead. This is a common source of confusion because the 1098-T is issued in your name as the student, but the credit goes on the parent's return.

If your parent does not have enough tax liability to use the full credit, the unused portion does not transfer to you. The credit is lost. In this case, it may be worth having the parent not claim you as a dependent so you can use the credit yourself, but this decision affects other parts of the return and should be checked with a tax professional or tax software before you file.

What to do if you do not receive a 1098-T or it is wrong

Schools are required to send a 1098-T by January 31 of the year after you paid tuition. If you do not receive one by mid-February, contact the school's financial aid or accounting office. Some schools do not issue a 1098-T if you received a scholarship or grant that covered your expenses, because the form is meant to report out-of-pocket costs only.

You do not need the 1098-T to claim the education credit. You can file your return with documentation of what you paid — receipts, tuition bills, or statements from the school showing charges and payments. The IRS may ask for this documentation later if you are audited. If the 1098-T you received is incorrect, contact the school and ask for a corrected form (called a Form 1098-T with an X in the correction box). If the school does not correct it, you can still file your return with the correct amounts and keep your own records as proof.

How education expenses reduce your refund in some cases

If you paid tuition with a 529 plan, Coverdell ESA, or scholarship money, the expenses covered by those sources do not count toward the education credit. Only out-of-pocket costs — money you or your family paid directly — may have access to. This means if a scholarship covered $10,000 of your $12,000 tuition bill, only the $2,000 you paid yourself can be used for the credit.

Similarly, if you claim the education credit for an expense, you cannot also claim a deduction for that same expense. For example, if you use tuition to calculate the American Opportunity Credit, you cannot also deduct student loan interest on the same tuition payment. You have to choose which benefit gives you the larger refund.

Frequently Asked Questions

Can I get a refund from the education credit if I do not owe any tax?

Yes, but only from the American Opportunity Tax Credit, and only up to $1,000 of the $2,500 maximum. The Lifetime Learning Credit is not refundable, so if you owe no tax, that credit will not result in a refund. If you are a dependent student with no income, your parent claims the credit on their return instead.

What if my parent paid my tuition but I file my own tax return?

If your parent claims you as a dependent, your parent must claim the education credit, not you. If you want to claim the credit yourself, your parent cannot claim you as a dependent. This affects other parts of the return, so check the math before you decide which way is better.

Does the 1098-T count room and board as a may have access to expense?

Yes, but only if you are at least a half-time student and the room and board is required by the school. The school reports this on the 1098-T in Box 2. If you lived off-campus or with family, room and board does not count, even if you paid for it yourself.

What if I paid tuition in 2024 but the school sent the 1098-T in 2025?

You claim the credit in the year you paid the tuition, not the year you received the form. If you paid in 2024, you claim it on your 2024 return, even if the 1098-T arrives in January 2025. You can file without the form and provide your own documentation.

Can I claim the education credit if my income is too high?

No. If your modified adjusted gross income exceeds the phase-out threshold for your filing status, the credit is reduced or eliminated. For 2023, the American Opportunity Credit phases out starting at $80,000 (single) or $160,000 (married filing jointly). You can check your MAGI to see if you are within the limit.