After the year has ended, there are several different tax reporting forms that you may receive.  One of the most common is your W-2, reporting your total earnings from your employer during the year, and the tax that was withheld on those earnings, among other information.  Other reporting forms include the 1098 and 1099 series.  Each of the various different forms contains information you may need to report on your income tax return.  The 1098 forms report expenses you paid or incurred that may qualify you for certain tax deductions or credits, and the 1099 forms report income you received or that was credited to your account, that you may have to report on your tax return.

1098 Statements – Expenses for Tax Deductions or Credits

The following is a brief description of the purpose and contents of the 1098 statements, and how the information should be reported on your tax return.

1098 – Mortgage Interest Statement 

Interest you pay on a qualified home mortgage loan is generally deductible as an itemized deduction.  The amount reported in box 1 is the interest you paid for the year.  This should be reported on line 10 of Schedule A of Form 1040 if you itemize deductions.

The amount in box 2 represents the points that were paid when you purchased a home.  Points are also generally deductible as interest, and the amount reported as points on your 1098 statement should be included with the mortgage interest from box 1 and reported on the same line 10 of Schedule A, provided you paid those points.  The amount reported in box 2 represents the points paid by you or the seller for the purchase of your principal residence.  If these points were paid by the seller, they would have to be subtracted from the basis of your residence.

Not all points have to be reported on the 1098 statement.  There may be other points you paid directly, that are included in the settlement statement for the purchase of your home.  If you paid any other points that are not included on the 1098 statement, you should deduct them on the separate line for that purpose on Schedule A.

A refund of overpaid interest, reported in box 3, should be reported as “Other Income” on line 21 of Form 1040 if you deducted the corresponding interest expense as an itemized deduction in a previous year.

1098-C – Contributions of Motor Vehicles, Boats and Airplanes

You will receive this statement if you donated a vehicle, boat, or airplane with a claimed value of over $500 to a charitable organization.  If the charity (donee) sold the vehicle, box 4a should be checked and the charity should send you this form within 30 days after the sale.  In this case, you can take an itemized deduction for a charitable contribution for the gross proceeds from the sale, as reported in box 4c, or the fair market value of the vehicle on the date you contributed it to the charity, whichever is lower.  But if your basis in the vehicle was less, your deduction may be limited to that amount.

The charitable organization is required to report what it does with the vehicle, boat or airplane you donated.  If the charity did not sell it, either box 5a or 5b should be checked.  The charity may use the vehicle in its work or may make substantial improvements (box 5a).  Or it may donate the vehicle to a needy individual, as part of its charitable purpose (box 5b).  In these cases, you can generally take a deduction for the fair market value of the vehicle on the date you donated it, or your basis in the vehicle, whichever is lower.

You must attach Copy B of Form 1099-C to your tax return in order to claim this deduction.  Otherwise, the deduction will be disallowed.  Generally, you would also have to file Form 8283, Noncash Charitable Contributions.

1098-E – Student Loan Interest Statement

The amount of interest you paid on a qualified student loan is reported in box 1 of this statement.  If your modified adjusted gross income is less than a certain maximum amount, you can deduct this interest as an adjustment to income on Form 1040 or 1040A.  The student must be you, your spouse, or your dependent, and must be enrolled in a degree program at qualified educational institution at least half-time.  The proceeds from the loan must have been used to pay qualified education expenses.  For purposes of this deduction, qualified education expenses include tuition and fees, room and board, books and supplies, and other necessary expenses, including transportation.

1098-T – Tuition Statement

This statement includes different amounts that you may need to report if you are claiming the tuition and fees deduction as an adjustment to income on Form 1040 or 1040A, or you are claiming an education credit – either the Hope credit or the lifetime learning credit, on Form 8863.  The educational institution can report either the total amount it actually received for qualified education expenses, or the total amount it billed.  The amount reported in box 1 represents the total amount the educational institution received from all sources for qualified tuition and related expenses.  If you made all the payments, this would be your total expense, if you are on the cash basis.  If you are on the accrual basis, you may need to use the amount billed in box 2.

For purposes of the tuition and fees deduction, just as in the case of the student loan interest deduction, the student must be you, your spouse, or your dependent.  The expenses must be required for enrollment or attendance at an eligible postsecondary educational institution. Unlike the student loan interest deduction, the student does not necessarily have to be enrolled in a degree program.  And also unlike the student loan interest deduction, expenses for purposes of the tuition and fees deduction do not include personal, living, or family expenses such as room and board.  The educational institution is required to make an allocation between qualified education expenses and personal expenses, such as room and board.  The amount reported on Form 1098-T should be qualified education expenses.  Box 4 shows the scholarships and grants that were processed by the educational institution for your account.  You may have to reduce your allowable expenses by this amount in calculating your tuition and fees deduction or education credit.

Box 3 shows any adjustments to qualified tuition and fees reported on a 1098-T for a prior year.  This may reduce any credit you can claim for prior year expenses.  Box 5 shows adjustments to scholarships and grants reported in a prior year.  This could also affect a deduction or credit you claimed for a prior year.

If any refunds or reimbursements were received from an insurer, they would be reported in box 7.  This amount would also reduce your allowable expenses for purposes of claiming a tuition and fees deduction or education credit.

Boxes 8 and 9 are for determining your eligibility for the Hope credit.  Being enrolled at least half-time (box 8) is one of the requirements for the Hope credit.  The student does not have to meet this workload requirement in order to qualify for the tuition and fees deduction or the lifetime learning credit.  If you are enrolled in a graduate program (box 9), you are not eligible for the Hope credit, but you may still qualify for the tuition and fees deduction or the lifetime learning credit.