Compare the education credits
The American Opportunity Tax Credit and Lifetime Learning Credit have different eligibility rules. Student status, income, qualified expenses, and prior use of a credit can affect eligibility. Not every education cost qualifies.
Coordinate funding sources
Scholarships, tax-free education assistance, and 529 distributions affect which costs remain available for other benefits. Do not use the same expenses for both a tax-free 529 withdrawal and an education credit.
Reconcile the school statement
Form 1098-T is a starting point. Compare it with the student account ledger, actual payments, scholarship terms, and receipts. Track the calendar year in which expenses and distributions occur.
A practical example
A family pays tuition with a scholarship, cash, and a 529 withdrawal. A simple worksheet allocating each expense to one benefit can show which tuition remains available for a credit.
What to gather
- Form 1098-T and the school account ledger
- Scholarship and financial-aid details
- Form 1099-Q and 529 distribution records
- Receipts for tuition, books, and other relevant costs
Official references
General educational information, not individualized tax, legal, or investment advice. Federal rules are summarized; state rules and your circumstances may differ. Check the rules for your tax year before acting.