Scholarships are not supposed to be reported on any 1099 form. But, sometimes they mistakenly are; usually a 1099-Misc. You may have to use a workaround*, in TurboTax, if that is your case. If "scholarship checks" were turned over to the school, they may well be reported on the 1098-T.
Q. Where are federal student loans accounted for?
A. Nowhere on the tax forms (or in TurboTax). As you said they count as "your money for AOTC and other expenses.
Q. I assume loans won't be in Box 5 of the 1098-T?
A. Correct.
Q. But, will loans be deducted from Box 1?
A.. No. All Qualified expenses (tuition and fees) will be included in box 1, regardless of what money (loans, scholarships or your out-of-pocket $) paid for them.
Q. The AOTC part asks about expenses, but limits you to $4000?
A. That's because it only takes $4000 of QEE to get the maximum AOTC ($2500, including $1000 refundable).
*The follow up interview that asks if there were scholarships not reported on a 1098-T also asks if any of the scholarship was already reported as earned inocme on a W-2 or 1099-Misc.
That brings up the question, who are these "larger donors" and why are they providing money. That is, is it really "scholarship" or soemthing else, such as "employer assistance". "Outside" scholarships are usually sent directly to the school and reported by the school in box 5 of the 1098-T (and are not reported on a 1099 sent by the donor).
