Is the amount entered in "NJ Tuition Deduction" taken from box 1 of 1098-T?

Yes, the amount entered in "NJ Tuition Deduction" is normally taken from Box 1 of Form 1098-T, which shows the total payments received for qualified tuition and related expenses. While Box 1 may contain related expenses, NJ notes:

• Tuition alone. NJ instructions page 24 states:
  • Line 37c – If you, your spouse, or your dependent enroll in or attend a New Jersey institution of higher education, you can deduct up to $10,000 for tuition costs paid during the year

 Original Post and TurboTax - NJ Tuition Deduction

Q. Is the amount entered in "NJ Tuition Deduction" taken from box 1 of 1098-T?

A. No. You must reduce the box 1 amount by any tuition paid for by scholarship amounts (shown in box 5) unless you allocate the scholarship money to other expenses, e.g. room & board or books and computer.  Scholarship amounts allocated to room and board are considered taxable income.