Q. Am I truly good JUST to fill in line 1 with his books added to that and leave line 5 blank for his scholarships?
A. No. You can not do that on his return. That only works as a short cut on you return, if you were eligible for the AOC, which we now know you are not. He has to enter the 1098-T, as is, and pay tax on $2893 of scholarship. He could enter his book expense, in box 1 (or later in the interview) to reduce the taxable scholarship.
Q. "So I will do all I can to help him."
A. That's going to be of limited benefit. We can get that $700 down to zero, on his return, by having him to claim the non-refundable portion of the AOC tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 dependent credit. To do that you're going to have to file an amended return to remove him as a dependent.
The AOC is limited to being claimed 4 times in a student's undergrad years. You may not want to waste one on a $200 savings (the max value is $2500).
Let me know if that's what you want to do and I'll explain how to enter it.
