Form 8863 - Which Colleges Count as First and Second on 1098-T?

The "first year" and "second year" questions on Form 8863 refer to academic years, not semesters. Since your daughter just started college in Fall 2024 and is now in Spring 2025, she's still in her first academic year of college (freshman year). You would mark her as a "first year student" on Form 8863. The academic year typically runs from Fall through Spring, so someone isn't considered a "second year student" until they begin their sophomore year (which would start in Fall 2025 for your daughter). This is important for claiming the American Opportunity Credit, which requires you to specify which year of post-secondary education the student is in. As for the 1098-T form, you don't need to attach it to your tax return. Just keep it with your records for at least 3 years in case of an audit. The IRS already gets a copy directly from the educational institution.

I was in a similar situation last year with my son and was totally confused by all the education credits and forms! Then I found this tool called taxr.ai (https://taxr.ai) that really helped me figure it out. I uploaded my son's 1098-T forms and it automatically identified all the qualified expenses and told me which year to select on Form 8863. What I liked was that it explained the whole "academic year vs. calendar year" confusion that I kept mixing up. Apparently the IRS cares about academic years for the student status question (first year, second year, etc.) but calendar year for the actual expenses. The tool sorted all of this out and showed me exactly what to enter on my forms.

Just wanted to update after trying taxr.ai for my education credits situation! I was totally confused about my daughter's 1098-T forms (she had two from different schools) and whether to mark her as first or second year student. I uploaded both 1098-Ts to the website and it immediately highlighted the qualified education expenses on both forms AND explained she should be marked as "first year" since she's still in her freshman year even though she's in second semester. It even showed me which expenses qualified for AOTC vs Lifetime Learning Credit. Honestly saved me hours of confusion and Google searches. Just finished my taxes and got the full education credit!

If you're having issues getting clear answers about Form 8863 or 1098-T questions from the IRS, try Claimyr (https://claimyr.com). I was stuck in an endless loop with the automated IRS system trying to understand if I could claim both my kids' education expenses when one is a first-year and one is a third-year student. After trying for two days to reach someone at the IRS, I found Claimyr and they got me through to an actual IRS agent in about 20 minutes. They have this clever system that navigates the IRS phone tree for you and calls you back when they've got an agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent cleared up my Form 8863 questions immediately and confirmed I was completing it correctly for both kids' different academic years.

OK I have to admit I was wrong about Claimyr. After posting that skeptical comment I was desperate enough to try it because I really needed to talk to someone about my daughter's education credits and whether I had the right academic year marked. It actually worked! I put in my number around 2pm yesterday, and about 35 minutes later got a call connecting me to a real IRS person. The agent confirmed that since my daughter is still in her first academic year (even though it's second semester), she counts as "first year" on Form 8863. They also answered my question about having two 1098-Ts from different schools - turns out you just combine the qualified expenses from both. Honestly wish I'd tried this weeks ago instead of stressing about it.

Just to add another perspective on Form 8863 - make sure you're keeping track of which year you're claiming the American Opportunity Credit for each student. You can only claim it for 4 tax years per eligible student, and they don't have to be consecutive years. I messed this up with my older daughter when she took a gap year in the middle of college, and we almost lost a year of credits. Double check if you've claimed it in previous years!

Has anyone had luck claiming the education credit when the 1098-T box 1 (payments received) is LESS than box 5 (scholarships)? My daughter got a big scholarship that covered tuition plus some room & board, but I know some of those living expenses aren't qualified education expenses anyway.