Info entered from the 1098-T shows that Box 5 (scholarships and grants) were more than Box 1 (Tuition and Fees). Turbo Tax then says not eligible for AOC since scholarships exceed expenses. However, per IRS Pub 970 page 16, IRS allows scholarships/grants to be allocated to non eligible expenses (and reported as income to the student), leaving some expenses to be used for the AOC. My question is, how can I enter this scenario into TurboTax so it will correctly calculate the AOC credit, without using Override? (Below is some text from IRS Pub to better explain the scenario I'm trying to figure out how to enter in TurboTax)
Coordination with Pell grants and other scholarships.
You may be able to increase your American opportunity
credit when the student (you, your spouse, or your dependent) includes certain scholarships or fellowship
grants in the student's gross income. Your credit may increase only if the amount of the student's qualified education expenses minus the total amount of scholarships and
fellowship grants is less than $4,000. If this situation applies, consider including some or all of the scholarship or
fellowship grant in the student's income in order to treat
the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that aren't
qualified education expenses such as tuition and related
fees.
Scholarships and fellowship grants that the student includes in income don't reduce the student's qualified education expenses available to figure your American opportunity credit. Thus, including enough scholarship or
fellowship grant in the student's income to report up to
$4,000 in qualified education expenses for your American
opportunity credit may increase the credit by enough to increase your tax refund or reduce the amount of tax you
owe even considering any increased tax liability from the
additional income
The fact that the educational institution applies the
scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, doesn't prevent
the student from choosing to apply certain scholarships or
fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the
part of the scholarship or fellowship grant applied to the
student’s nonqualified expenses in income), the student
may increase taxable income and may be required to file a
tax return. But this allows payments made in cash, by
check, by credit or debit card, or with borrowed funds such
as a student loan to be applied to qualified education expenses.
