Is NHSC scholarship tuition coverage (box 5 on 1098-T) considered "tax-free employer provided assistance"?

[user2794]

I am a National Health Service Corps scholarship recipient. On my 1098-T, box 5 contains the amount of tuition that was covered by the NHSC, which is supposed to be strictly tax-free. However, when I enter it on TurboTax, the amount in federal tax I owe sky-rockets. Can I consider this amount "tax free employer provided assistance" and mark it as such so it is not incorrectly taxed? 

Note: I do still want to include my 1098-T when I file because I received the scholarship halfway through the year and would still like to deduct the tuition payments I made earlier in the year (box 1). 

[Ashby]

Your scholarship is not taxable up to the amount that it covers qualified education expenses. If your Box 5 amount exceeds Box 1 plus any other qualified education expenses, it is taxable.

You will be eligible for education credits if your Box 1 number exceeds Box 5. I looked up the scholarship and included an attached image. If you are receiving a monthly stipend, that amount is taxable.

[user2794]

Thanks! My box 1 exceeds box 5, so it should not be taxable, but when I enter in the information from my 1098-T, it still counts my box 5 towards the federal tax I owe. That's why I'm wondering if I can mark the box 5 amount as "tax-free employer provided assistance" so it does not contribute to what I owe in federal taxes.
The stipend is indeed taxable, but that is included on a separate W-2.

[Ashby]

How much does Box 1 exceed Box 5 by? It is not tax-free employer provided assistance. It's a scholarship. I think you might be seeing a reduction of credit because there is not too much difference between the two boxes.

[user2794]

Box 1 exceeds box 5 by almost $13,000. If it turns out that I don't qualify for an education credit because of the scholarship, do I still need to include the 1098-T on my tax return at all?

[Ashby]

Unless you income is high or you are being claimed by someone as a dependent, you should be eligible for an education credit.

[user2794]

But for some reason, when I enter my 1098-T info, I go from having a federal refund to owing a large amount in federal taxes, which doesn't make sense to me. The only reason I can think of is that the scholarship tuition coverage (box 5), which is $13,000 less than box 1, is being considered taxable income.