Free Guide to Understanding Your 1098 Tax Form

What Is a 1098 Form and Who Receives One

The 1098 form is a tax document that reports money you paid for certain qualified education expenses during the tax year. Unlike the more commonly known 1040 form that most people file, the 1098 is a specialized document sent only to people who meet specific conditions. If you took out a student loan and paid interest on it, or if you paid tuition and fees at a college or university, you might receive one of several types of 1098 forms.

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The IRS actually uses different versions of the 1098 form for different situations. The 1098-T reports qualified education expenses paid by you or your family members. The 1098-E reports student loan interest you paid during the year. The 1098 form itself (without a letter suffix) typically relates to mortgage interest, which is different from education expenses entirely. For this guide, we're focusing on the education-related versions: the 1098-T and 1098-E, as these are the ones connected to paying for college and managing student debt.

Schools and loan servicers are required by law to send these forms to you if you meet the thresholds for reporting. For a 1098-T, your school must report it if you paid at least $600 in qualified education expenses during the tax year. For a 1098-E, your loan servicer must report if you paid at least $600 in student loan interest. These forms arrive by January 31st each year, reporting on expenses and interest from the previous year.

One important thing to understand: receiving a 1098 form does not automatically mean you will receive a tax credit or deduction. The form simply reports that certain payments were made. Whether you can actually use those payments to reduce your taxes depends on your income level, your filing status, and which education tax benefits you use. Some people who receive a 1098-T, for example, may not be able to claim a credit because their income exceeds the limits for that particular credit.

What to know: You may receive a 1098 form in your name, but if someone else paid your education expenses on your behalf, that other person might be the one who receives the form instead. This happens often with parents paying for their child's tuition. The form goes to whoever made the payment, not necessarily the student who attended school.

Understanding the 1098-T: Education Expenses Explained

The 1098-T form reports qualified education expenses that you or your family paid to a college, university, or other post-secondary educational institution. The form breaks these expenses into specific categories so you can see exactly what types of costs are being reported. Box 1 and Box 2 show qualified tuition and related education fees paid during the tax year. These include tuition, lab fees, required course materials, and other mandatory charges that the school bills directly to students. The form separates expenses paid during 2024 (which would be reported on your 2024 tax return) from expenses paid in early 2025 for the 2025 tax year.

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Box 5 on the 1098-T shows scholarships or grants you received. This is critical information because scholarships complicate your ability to claim education tax benefits. If you received a scholarship of $5,000 and paid $7,000 in qualified expenses, only $2,000 of your expenses can be used for tax purposes. Many students and families miss this detail and either incorrectly claim credits they shouldn't or don't understand why their credits are smaller than expected.

Importantly, the 1098-T does not include living expenses, room and board, transportation, or books purchased outside the school's bookstore (unless required and bundled with tuition). Computers and related equipment are generally not reported unless the school specifically requires a particular computer model as part of the course curriculum. Student health fees are sometimes included and sometimes not, depending on how the school reports them.

The IRS offers two main education credits that use the expenses reported on the 1098-T: the American Opportunity Tax Credit (up to $2,500 per student per year) and the Lifetime Learning Credit (up to $2,000 per return per year). You cannot claim both credits for the same student in the same year, and your income must fall below certain thresholds to use these credits. For 2024, the American Opportunity Credit phases out for single filers with income over $80,000 and married filing jointly filers with income over $160,000.

What to know: The 1098-T you receive in January reports only what the school reported to the IRS. It does not include expenses you paid out-of-pocket that weren't processed through the school's billing system. However, you can sometimes claim those expenses anyway if you have receipts showing they were genuinely required for enrollment. Keep your own records of all education payments you make.

Decoding the 1098-E: Student Loan Interest

The 1098-E form tracks the interest you paid on federal and private student loans during the tax year. Unlike the 1098-T, which connects to tax credits, the 1098-E connects to a tax deduction. A student loan interest deduction allows you to reduce your taxable income by up to $2,500 of student loan interest paid in a single year. For many people with student debt, this deduction provides meaningful tax relief even if they don't qualify for education credits.

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Box 1 on the 1098-E shows the total amount of student loan interest you paid during the year. This includes interest on federal student loans (Stafford loans, Grad PLUS loans, and Consolidation loans) and private student loans. The form does not include principal payments—only the interest portion. If you paid $8,000 total on your student loans but $2,000 of that was interest and $6,000 was principal, only the $2,000 appears on the form.

Your loan servicer calculates what portion of your payment goes to interest based on your loan's terms and how much you owe. Early in your loan repayment, a higher percentage of each payment covers interest. Later, more of each payment goes toward the principal. This is why people paying off old loans often see higher interest amounts on their 1098-E forms, even if their monthly payment amount stayed the same.

One key difference between the 1098-E deduction and the 1098-T credits: the student loan interest deduction has income limits, but they're higher than the credit limits. For 2024, you begin losing the deduction when your modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married filing jointly. The deduction phases out completely at $90,000 and $180,000 respectively. Additionally, you cannot claim a dependent on someone else's return and also claim the student loan interest deduction—you can only do one or the other.

The 1098-E also shows in Box 2 whether you are the student loan borrower or the individual who made the payment on someone else's behalf. This matters because only the person whose name appears on the loan can claim the deduction. If your parent paid your student loans, your parent claims the deduction, not you. However, your parent cannot claim the deduction if you claim yourself as a dependent on your own return.

What to know: Interest paid during income-based repayment, pay-as-you-earn, and other income-driven repayment plans still counts toward the deduction. Some borrowers in temporary hardship situations made zero payments but still saw interest accrue—that accrued interest can still be deducted when you eventually pay it.

How 1098 Forms Connect to Your Tax Return

When you file your federal income tax return, you reference information from your 1098 forms to determine which education benefits you can claim. The process differs slightly depending on whether you're using the 1098-T or 1098-E, but both forms feed into your overall tax picture. If you're using tax software like TurboTax or TaxAct, the software often has a space where you enter information from your 1098 forms, and the program calculates which benefits you qualify for and how much they're worth.

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For the 1098-T, you would enter the qualified education expenses and scholarship amounts into your tax return. The software then checks your income level and filing status against the IRS thresholds for the American Opportunity Tax Credit and the Lifetime Learning