@kgraghu said "Turbo Tax will consider up to $4,000 of room and boarding charges for the American Opportunity Tax credit calculation if you say that you spend money from your son's qualified scholarship to cover that cost."
Not exactly, but essentially yes. Room and board are not qualifed expenses for the AOC. You're using a known tax loop hole. Scholarships are tax free, to the student, if he uses it for qualified expenses (tuituon, fees and books and other course materials). Scholarships used for other living expenses are taxable income. Usually, you can "elect" to treat his scholarship as taxable income (on his return), so that you (the parent) can claim the AOC on your return.
There is a tax “loop hole” available. 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 (or himself, if he is not a dependent) 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 ( this may be indicated by the school’s billing statement specifically showing the scholarships being applied to tuition).
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.
The way you enter this in TurboTax (TT), when asked if any of the scholarship paid for room & board, in the parent’s interview, enter $6000 (in the 1st example above).
So, yes, essentially you can claim food (or any other non "qualified") costs of $4,000 under "Room and Board".
