AOTC with covered scholarships and grants.

[Drewfink1121]

My tuition for the academic year was fully covered with grants and scholarship. My FAFSA was 4.5K. If I’m understanding correctly, I can put 4K of this amount towards taxable income which would be beneficial since my taxes owed vs AOTC would be substantially better with my current bracket. 

What I’m worried about is that when I filed and I entered my 1098-T form electronically I had to subtract 4000 from grants/scholarships and then added that 4000 as a taxable scholarship. Was this done correctly? 

[Hal_Al]

The way to do it is: when your are asked how much of the scholarship was used for room & board, enter the amount you want to be taxable. Example $5000 in box 1 of the 1098-T and $6000 in box 5.  In order to use $4000 of tuition for the AOTC, you need to say that $5000 of the scholarship was used for R&B. 

Books and computer costs can reduce the amount you have to declare as taxable.

I assume you are otherwise eligible; over 24 and not your parent's dependent or supporting yourself with earned income.