Student Accounts - Graduate Summary
1098-T tax statements
Do I pay taxes on this amount? Does it have something to do with my earnings? No.
The information on the IRS form 1098-T is issued to assist those eligible to claim a
nonrefundable credit against their Federal income tax for the payment of certain
postsecondary educational expenses.
There are three tax credits related to the 1098-T: Hope Scholarship Credit and Lifetime
Learning Credit (claimed using IRS Form 8863), and an ‘above-the-line’ deduction
(claimed using IRS Form 1040/1040A). You can only claim one of these each tax
What are the Hope Scholarship and Lifetime Learning Credits?
These are tax credits to help you offset the costs of higher education by reducing the
amount of your income tax. A tax credit reduces the amount you may have to pay (unlike
a deduction which reduce the amount of income subject to tax, a credit directly reduces
the tax itself). The credit is limited by the amount of your income and the amount of
What is the difference between these two credits? There are eligibility differences and
only one may be claimed each year.
Hope Credit Lifetime Learning Credit
Up to $1,500 credit per eligible student Up to $2,000 per return
Available ONLY until the first 2 years of Available for an unlimited number of years of
post-secondary education are complete postsecondary education and for courses to
acquire or improve job skills
Available ONLY for 2 years per student Available for an unlimited number of years
Student must be pursing an undergraduate Student does not need to be pursing a degree or
degree or other recognized credential other recognized credential
Must be enrolled at least half time Available for one or more courses
No felony drug conviction Felony drug conviction rule does not apply
For graduate students, it is more likely that the Lifetime Learning Credit will apply.
o Restrictions - you cannot claim the lifetime learning for 2003 if any of the
Your filing status is married filling separately
You are listed as a dependent on another’s tax form
Your modified gross income is $51,000 or more ($103,000 joint)
You (or your spouse) were a nonresident alien for any part of 2003 and the
nonresident alien did not elect to be treated as a resident alien for tax
You claim the Hope credit or take an above the line deduction.
No double benefits are allowed. If higher education, for example, is listed
as a business expense on your tax form you cannot claim the credit. You
cannot claim the credit based on qualified tuition paid with tax-free
scholarships, fellowships, grants, or employer-provided educational
o You can claim a lifetime learning credit for qualified education expenses paid
with the proceeds of a loan.
o The amount of the lifetime learning credit is 20% of the first $10,000 of qualified
education expense paid. The maximum claim amount in 2003 is $2,000.
However, the amount may be reduced by your modified gross income.
o You can claim the credit on IRS form 8863.
What is the ‘above-the-line deduction’? There is a tuition and fees deduction you may be
able to claim on your 1040, line 26, or 1040A, line 19. The tuition and fees deduction
can reduce the amount your income subject to tax by up to $3,000.
o The max amount goes up to $4,000 in 2004. The deduction may be a benefit to
you if you cannot take either the Hope or Lifetime Learning credit because your
income is too high.
o The tuition and fees deduction is available for 4 years, 2002 through 2005.
o You cannot claim the tuition and fee deduction if any of the following apply:
Your filing status is married filling separately
Another person is claiming an exemption for you as a dependent
Your modified gross income is more than $65,000 ($130,000 joint)
You were a nonresident alien for any part of the year and did not elect to
be treated as a resident alien for tax purposes
You claim a Hope or Lifetime Learning credit.
What charges are being reported to the IRS? Eligible charges are limited to tuition and
certain mandatory fees, like the Student Government fee and the Transcript fee.
Expenses that do not qualify include insurance, medical expenses (including any
mandatory student health fee), room and board, transportation, hobby courses, or any
living and personal expense – even if they are mandatory.
o Because of these exclusions, the regulations required that we un-bundle from your
tuition charge the student health plan fee in our reporting of eligible charges.
Why did we file this form with the IRS? Princeton must file a 1098-T form for every
student we enroll from whom a reportable transaction is made. The requirement started
with the 2002 tax reporting, however we were only required at that time to report student
information, not financial, in order to give institutions time to align themselves for the
new reporting. There are reporting exemptions; however, institutions may still report
these students. This year, Princeton has elected to report all students with reportable
o Some reporting exemptions include:
o Non resident aliens, unless requested by the student
o Those whose tuition is entirely waived or paid entirely with scholarship
o Those enrolled students taking course for which no academic credit is offered.
Only eligible charges actually paid by the taxpayer to an eligible institution are
considered for any of these tax credits.
The 1098-T reflects the amounts billed for what the IRS has defined as eligible charges,
and includes any scholarships, grants, or fellowships processed on your Student Account.
Next year, we are required to report any adjustments we may make to the amounts
Tax credits are based on the actual amount you paid towards these charges during the
calendar year. Since Princeton allocates payments to your ‘account’ rather than making
charge specific allocations, it is not possible to accurately report amounts paid just for
these eligible charges. Therefore, we’ve elected to report amounts billed. If you qualify
for an educational tax credit, you should refer to your personal records and Student
Account statements to determine the amounts that you actually paid towards the eligible
charges reported on the 1098-T.
Bursar and Director of Loans and Receivables
February 11, 2004