How do I apply part of scholarship to room and board rather than to tuition?

[Gene 01]

Our 21 year old dependent daughter received $22,339 in scholarships in 2018. There was no stipulation as to what her scholarships had to be used for. Her tuition was $10,320, leaving an excess of $11,931. I entered her 1098-T into our tax return in TurboTax. I was given the message that she would not be eligible to receive any education credit because her scholarship exceeded her tuition and that she would need to file her own tax return to claim the excess $11,931 scholarship money as income. She also had $1429 to report as income from a W-2, $135 spent on books.

There is a highlighted question in TurboTax that asks "Is there a way to increase my credit?" speaking of the education credit. If I understand correctly, it says that I can apply up to $4000 of the scholarship to room and board in order to receive the education credit. I understand that taxes would have to be paid on that $4000 but that the education credit would exceed the taxes. I have tried reading the questions posted in the past in the TurboTax community to make sure that I was entering it correctly, and there seems to be some disagreement as to whether this can be done.

Please explain this more thoroughly with details as to where exactly to enter all information on our return and on our daughter's return.

[Anita01]

Yes, you can do this.

You are specifically asked in the interview for education expenses, Did you pay for Room and board with a Scholarship or Grant?  If you say Yes, then you are asked how much of the Scholarship amount in Box 5 you used for this expense.  That's all there is to it.

If you want her to receive an education credit, you have to leave at least $4,000 of tuition expenses unpaid by the Scholarship.  

For example, tuition was $10,000, 

Scholarship was $20,000.  

You would say you used $14,000 to pay room and board (assuming room and board bill was that high), 

which would mean only $6,000 used to pay tuition. 

Paying that amount of tuition with the scholarship, still leaves $4,000 of tuition expense unpaid, to use for the education credit.