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I received 1098-T form from my graduate school in US. In the form, there are two nonzero amounts:

  • Amounts billed for qualified tuition and related expenses (box 2)
  • scholarships or grants (box 5)

I was wondering

  1. if the two amounts should be reported somewhere in federal tax 1040 form?

  2. Payments received for qualified tuition and related expenses (box1) is zero, but on the back of the same paper, Personal Payments are nonzero which is what I actually paid for my tuition. Are the two not consistent with each other? Shall I report the nonzero Personal Payments that I paid somewhere in 1040 form?

  3. The instruction of 1040 says there are two ways to claim the benefits

    1. reported as adjustment to income in line 34 "tuition and fees" of Form 1040 attached with Form 8917
    2. reported as tax credit in line 49 "educational expenses" of Form 1040 attached with Form 8863

    If I understand correctly, it also says that I can choose only one of the above two ways, not both, does it? If yes, I was also which way to go? Does the choice depends on whichever favors me?

  4. when trying the second way in part 3 using Form 8863, I have to choices, either "the American opportunity credit" or "the lifetime learning credit", but not both. The former requires that student must be pursuing an undergraduate degree or other recognized education credential, while the latter requires that student does not need to be pursuing a degree or other recognized education credential. I am a graduate student, not an undergraduate, and am I qualified for the former, i.e., "the American opportunity credit"?

Thanks and regards!

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Yes, the information on your 1098-T is required to be reported on your federal tax return as it is considered taxable income. You may receive offsets and benefits in the form of credits to make up for the potential tax liability.

Your choice of how it is reported is determined by what education based credits you qualify for and which benefit you the most.

I would recommend using a tax preparation program (like TurboTax) to guide you through the process. That way you can quickly see which of the various filing options are most favorable for you.

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