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Taxpayer Information - Taxpayer Relief Act of 1997
If you are a US resident for tax purposes, you may be eligible to claim a tax credit on your federal tax return if you paid qualified educational expenses to the University of Michigan. The Taxpayer Relief Act of 1997 provides educational tax incentives for eligible taxpayers. These benefits, called the American Opportunity Tax Credit (a modification of the Hope credit) and the Lifetime Learning Credit, allow taxpayers to reduce their federal income tax based upon qualified tuition and fees paid, assuming the taxpayer meets all eligibility requirements. The determination as to whether you qualify for tax credits should be made in consultation with your personal tax advisor or the Internal Revenue Service. The information is provided for informational purposes ONLY. The University of Michigan cannot provide tax advice nor make a determination as to whether you qualify for tax credits. Please contact your tax advisor or the Internal Revenue Service at 800.829.1040 with any tax questions you may have.
Several education tax benefits are available to lessen the financial burdens of higher education. The American Recovery and Reinvestment Act of 2009 introduced some changes to college tax credits. The American Taxpayer Relief Act of 2012 extended some of these credits through 2017.
The American Opportunity Tax Credit (a modification of the Hope credit) originally slated to expire at the end of 2010 has been extended through 2017. This credit is available to eligible students for payments made for the first four years of post-secondary education. The maximum credit per student is $2,500 (100% of the first $2,000 and 25% of the next $2,000 of qualified expenses). Students must be enrolled at least half-time for at least one academic period that begins during the tax year and must be pursuing an undergraduate degree or other recognized education credential.
The Lifetime Learning Credit is available to students for payments made for undergraduate, graduate, continuing education course work or courses that help the student acquire or improve job skills. The credit is equal to 20% of the first $10,000 of out-of-pocket qualified tuition and related expenses. The maximum credit is $2,000 per family, not per student. A taxpayer is limited to one Lifetime learning credit per year regardless of the number of eligible dependent students in the family. Qualified payments include tuition and required fees but specifically exclude books, room and board, insurance, transportation, etc.
IRS form 1098-T is available each year by January 31 to all students who were registered for an academic term during the previous calendar year, and whose tuition and qualified expenses are greater than the awarded scholarships and grants for that calendar year. (Example: 2012 Form 1098-T was available by January 31, 2013.) Form 1098-T is used to report demographic and financial information required by the IRS for the Taxpayer Relief Act of 1997, the 2009 American Recovery and Reinvestment Act, the 2010 Tax Relief Act, and American Taxpayer Relief Act of 2012. The demographic information includes student name, social security number, address, and yes/no indicator boxes for half time enrollment and graduate level enrollment. The financial information includes amounts billed for qualified tuition and related expenses, including adjustments for prior years; and scholarship and grants, including adjustments for prior years. Students may view/print their form 1098-T and detailed information used to prepare the form in Wolverine Access (Student Business, Financial Information, View Form 1098-T). Students may contact Student Financial Services if the information is incomplete or believed to be incorrect. Students should be sure to include their full name and UMID number in all correspondence sent to our office. Additional information on some of the education incentives contained in the Taxpayer Relief Act of 1997 may be obtained on the IRS website.
Please note that beginning in 2012 box 5 (scholarships and grants), and box 6 (Adjustments to Scholarship or Grants for a Prior Year) includes not only grants and scholarships, but payments made by third parties (excluding family members and loan proceeds). This includes payments received from governmental and private entities such as the Department of Defense, civic, religious organizations, and nonprofit entities. The amounts in Box 5 are included regardless of taxability, and it is important to remember that the 1098-T was not designed to capture information on taxable scholarships or in any way address the tax treatment of aid.
Additional information on how to use the information on the 1098-T for your taxes may be obtained on the IRS web site at the following links: