You clam what was paid in 2016 for tuition (and other education expenses) for 2016 expenses and possible (you are allowed to take if they were paid in 2016) the first 3 months of 2017.
Report the 1098-T as the school reported it, but if there was additional funds "RECEIVED" by the school in tax year 2016, click under box 2 on the 1098-T screen in the program on the link that says "What if this is not what I paid to the school?" and enter EVERYTHING that was paid to the school. This includes scholarships, grants, loans, gifts, and cash.
(please see screen shot below)
Be sure to keep a copy of proof of those payments, such as your student account statement, with your tax files.
According to the IRS:
“Prepaid expenses. Qualified education expenses paid in 2016
for an academic period that begins in the first 3 months of 2017 can be used in
figuring an education credit for 2016 only. See Academic period, earlier. For
example, if you pay $2,000 in December 2016 for qualified tuition for the 2017
winter quarter that begins in January 2017, you can use that $2,000 in figuring
an education credit for 2016 only (if you meet all the other requirements). “
CLICK
HERE for IRS Pub 970 Tax Benefits for Education
CLICK
HERE for a guide to the 1098-T
