Q. If the scholarships are not restricted, how do you account for the actual amount that was paid out-of-pocket for the rest of the tuition (part not covered by scholarships that paid with money made by working).
A. You enter your expenses, you enter your scholarship amount. The difference is considered paid by you.
Q. How is this amount factored into the 1098-T?
A. In TurboTax (TT), you enter your expenses, you enter your scholarship amount. The difference is considered paid by you and TT will calculate the tuition credit based on those entries.
What are you trying to do? You mention "paid with money made by working". That indicates you might be a student dependent trying to claim the credit on her own tax return. The rule is not how much tuition you paid with work money, it's how much of your total support came from working. That's a separate issue from the calculation of the tuition credit. You make no entries about that in the 1098-T interview.
There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.
You cannot claim the (up to) $1000 refundable credit if you are, or can be, claimed as a dependent by someone else.
Reference: Line 7 instructions for form 8863.
https://www.irs.gov/instructions/i8863#en_US_2024_publink53002gd0e674
