If scholarships exceed qualified education expenses that would be income for the student if they have a filing requirement. The parent claims education credit if eligible. If you let us know the amounts on the 1098-T we can advise further.
Parents: If the student listed on the 1098-T is your dependent, enter the 1098-T on your return, even if your dependent paid the tuition.
Students: If you're not being claimed as a dependent, enter the 1098-T on your return regardless of who paid the tuition, unless it was your employer. In that case, just keep the 1098-T with your tax records.
Here's how to enter your 1098-T in TurboTax Online:
Or Federal tab > Deductions & Credits > Education > Expenses and Scholarships (Form 1098-T), then Start.
Be sure that he/she indicates that he/she is listed as a dependent on someone else's return (her parent(s)).
Q. If dependent files own taxes including 1098-T, do I still enter anything in education area?
A. Yes, probably. The 1098-T can, sometimes, be entered on both the student and the parent's return.
The student-dependent is not allowed to claim a tuition credit, on his own tax return. Only the parent is allowed the tuition credit. The student would only enter the 1098-T if some of his scholarship was taxable.
Even then, there is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the conditions of the grant are that it be used to pay for qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.