In years past, TurboTax has asked me if I had other taxable income from Scholarships, but this year, even if I explicitly search for it, I cannot add this excess to my income. I have already filled out my form 1098-T under the deductions menu, but the excess money is not being automatically added to my income. I understand that this excess income would fall under line 8r in the Schedule 1 section of the 1040 form, but as of April 2024, TurboTax does not seem to offer any means of manually adding this amount or prompting users that have excess scholarship income.
If you entered your 1098-T and there was more in box 5 than Box 1, TurboTax automatically adds it to Schedule 1, Line 8r. See example below and go all the way through the Education interview. This 1098-T had $5K more in scholarship than tuition when I entered it.
As others have said, If you entered your 1098-T and there was more in box 5 than Box 1, TurboTax automatically treats the difference as taxable income. The taxable amount will be reduced by any book and computer expenses you enter. The taxable amount can be increase for any amount used by your parents to claim the tuition credit. You will eventually reach the screen "amount used to claim the education credit". If TT has not prepopulated that with $4000, you should enter (or change to) $4000 (the amount needed to get the maximum AOTC).
If your situation is different, reply with details for a workaround.