Why Is My 1098-T Less Than What I Paid for Tuition?

The 1098-T tax form helps students and families determine eligibility for education-related tax credits, but the reported amount is often lower than expected. Many assume it should match their tuition payments, but several factors create discrepancies.

Understanding why your 1098-T doesn’t reflect the full amount you paid requires examining how educational institutions report payments, what expenses qualify, and how financial aid affects the total.

Differences Between Qualified and Non-Qualified Expenses

The IRS defines qualified education expenses as tuition and mandatory fees required for enrollment. Costs like room and board, insurance, medical fees, transportation, and personal expenses are excluded.

For example, if you paid $15,000 to your university, but $5,000 went toward housing and meal plans, only $10,000 in tuition and fees would be reported on your 1098-T. Tax credits like the American Opportunity Credit and the Lifetime Learning Credit apply only to qualified expenses.

Even within tuition and fees, some charges may not count. Course materials like books and supplies are only qualified if they must be purchased directly from the institution. If you buy textbooks from an outside retailer, those costs won’t appear on your 1098-T, even if required for coursework.

Timing of Payments vs. Reporting Period

The amount on your 1098-T is based on when payments are processed, not when tuition is billed. Schools report payments received for qualified tuition and related expenses in Box 1, and these amounts are recorded in the year they are actually paid.

For instance, if you registered for spring semester classes in December but paid in January, that payment would appear on the 1098-T for the new tax year. If you made an early payment for an upcoming term, it might show up on the prior year’s form.

Refunds or adjustments can also change the reported amount. If you paid tuition in one year but later received a refund or reduction, the school may adjust the reported figure on a future 1098-T. This can happen if you dropped a course or if a retroactive scholarship was applied after an earlier payment.

Scholarships, Grants, and Other Financial Aid Reductions

Financial aid reduces the amount reported on your 1098-T, even if you paid more out-of-pocket than expected. Scholarships, grants, and other tuition assistance are subtracted from qualified expenses before the final amount appears in Box 1.

For example, if your tuition was $20,000 but you received a $7,000 scholarship and a $3,000 federal grant, your school would report only the remaining $10,000 in Box 1. The IRS considers most scholarships and grants tax-free when used for qualified education expenses, but they don’t count toward tax credits like the American Opportunity Credit or Lifetime Learning Credit. Any portion of financial aid used for non-qualified expenses, such as housing or meal plans, may be taxable income.

Employer tuition assistance and fellowship stipends can also affect the reported amount. Employer-provided educational benefits up to $5,250 per year are tax-free, but anything beyond that is taxable. If your employer pays tuition directly to your school, it reduces the amount in Box 1, similar to a scholarship or grant. Fellowship stipends may be partially taxable if they cover living expenses rather than tuition.

Adjustments and Revisions Issued by the Institution

Schools may revise a 1098-T due to tuition changes, financial aid corrections, or clerical errors. These adjustments can result in a modified form, sometimes requiring an amended tax return if they affect eligibility for education-related credits.

A common reason for a revision is a retroactive tuition adjustment. If a school lowers tuition due to a policy change, administrative decision, or financial reconsideration, the updated amount may be lower than originally expected. If a student withdraws from a course and receives a partial refund, the institution may issue a corrected 1098-T.

Errors in reporting can also lead to adjustments. If a university over-reports payments or fails to apply a reduction correctly, it may issue a corrected form. Schools typically mark these revisions with a checkbox in the top left corner of the 1098-T, indicating that the IRS has been notified.

Potential Transactions Not Included in Box 1

Even after accounting for qualified expenses, financial aid reductions, and timing differences, some payments to an educational institution may not appear in Box 1. Schools only report payments for tuition and mandatory fees, so certain transactions that students assume would be included are left out.

One common omission is payments made directly to third-party vendors for course materials, technology fees, or other educational resources. If a university partners with an external provider for online course access or lab materials, those costs may not be reflected on the 1098-T, even if required for enrollment.

Student loan disbursements sent directly to the borrower rather than the institution are also not included in Box 1, even if used to pay tuition. This can create discrepancies between personal financial records and the reported amount.

Employer tuition reimbursements do not appear on the 1098-T, as they are considered separate from direct payments to the school. If an employer reimburses an employee after tuition has been paid, that transaction is not captured in the school’s reporting. Payment plans extending beyond the reporting year may also result in partial amounts being included, depending on when the institution records the payments. These exclusions make it important for students to keep detailed documentation of all education-related expenses.