What you need to do with the amount in Box 4 and/or Box 6 of the Form 1098-T for the current tax year depends on what was claimed on the prior year tax return in regards to the education expenses or scholarship income.
If you claimed an education credit in a prior tax year (i.e. American Opportunity Credit or Lifetime Learning Credit), you need to refigure that credit, taking into account the adjustment, and then enter the decrease in credit on the current year's return.
To make an entry for the recapture of an education credit claimed in a prior year:
- From within your TaxAct® return (Online or Desktop), click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
- Click Education to expand the category and then click Recapture of prior year education credits
- Enter the recapture amount you have calculated.
This amount is then added to the total tax on Form 1040, Line 44 and you will see the text "ECR" next to this line on your printed copy of the return per the IRS Instructions for Form 1040.
Note: The amount of the credit recapture is NOT the adjustment amount from the Form 1098-T. Rather it is the difference between the credit as it was originally calculated and the recalculated credit amount once the adjustment has been made to the tuition expense on the prior year return. You may find it helpful to review a copy of your prior year's Form 8863 and then fill out a revised copy using updated figures. CLICK HERE
to print a blank prior year Form 8863 from the IRS website to assist you in this process.
If you instead claimed a tuition deduction in the prior year (i.e. Tuition and Fees Deduction), you will need to add the adjustment amount to your taxable income on Form 1040, Line 21.
To report the adjustment on Form 1040, Line 21 as Other Income:
- From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click in the upper left-hand corner, then select Federal.
- Click Other Income to expand the category and then click Prizes, awards or other miscellaneous income
- Enter the recapture amount you have calculated in the box Recapture of prior year tuition and fees deduction