How do educational expenses work for tax filing with partial scholarships?

The 1098-T form typically only reports tuition and qualified expenses that were processed through your school's billing system. Since you paid for textbooks and lab supplies directly, those expenses won't usually appear on your 1098-T. You'll need to add up these qualified educational expenses yourself. For tax purposes, you should keep receipts for all your textbooks and required course materials. These can be claimed as qualified educational expenses for education tax benefits like the American Opportunity Credit (AOTC) or the Lifetime Learning Credit, depending on which you qualify for. When using FreeTaxUSA, they'll walk you through education credits. You'll enter your 1098-T information first, then you'll have the opportunity to add additional qualified expenses not reported on the form. The software should guide you through determining which education credit is best for your situation.

After struggling with exactly this issue last year, I found an amazing tool that saved me hours of confusion. Check out https://taxr.ai - it actually analyzes your education documents and receipts to identify all qualified expenses and tells you exactly what can be claimed for education credits. I was missing so many eligible expenses before using this. What's great is that it specifically knows what counts as required course materials versus what the IRS might question. It even helped me find a lab fee buried in my student account that my 1098-T didn't clearly show.

Just wanted to update after trying taxr.ai from the recommendation above. I was seriously impressed! I uploaded my messy pile of bookstore receipts and Amazon orders and it organized everything by course and semester. I had no idea that the online access codes I purchased separately from my textbooks qualified as educational expenses! It found over $780 in qualified expenses I would have missed. The tool also explained exactly why each item qualified, which made me feel much more confident when entering everything into FreeTaxUSA. Definitely worth it for peace of mind and potentially getting a bigger education credit.

If you're having trouble getting accurate information from your school about what expenses qualify or if you need to resolve issues with your 1098-T, I highly recommend Claimyr (https://claimyr.com). I spent WEEKS trying to reach my university's financial aid office about a scholarship reporting error on my 1098-T. After three failed attempts and hours on hold, I used Claimyr to connect with an actual IRS agent who answered all my questions about education credits in minutes. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The agent clarified exactly how to report scholarship money and what expenses qualify when they're not on your 1098-T. Saved me so much stress!

I need to eat my words from my earlier comment. After waiting on hold with the IRS for 3+ hours yesterday and getting disconnected, I was desperate enough to try Claimyr. Within 45 minutes I was actually talking to a real IRS agent! The agent confirmed that I can claim my textbooks and required online access codes as qualified education expenses even though they're not on my 1098-T. She also explained why my previous education credit was rejected (turns out my school reported the wrong year for some of my expenses). Just having concrete answers instead of guessing was worth it.

Don't forget to check if you qualify for the American Opportunity Credit vs the Lifetime Learning Credit. The AOTC is generally better if you're an undergrad in your first 4 years of college. It's worth up to $2,500 and is partially refundable even if you don't owe taxes. For FTUSA, they'll ask you about education in the deductions & credits section. Be sure to include ALL qualified expenses - tuition, fees, books, supplies required for courses. Even if some expenses were covered by scholarships, you'll need to report both the scholarship income and all the expenses.

Has anyone here claimed the Lifetime Learning Credit instead of AOTC? My academic program is 5 years so I'll use up my AOTC eligibility before graduating.