it is quite clear that any payments for services rendered for room & board are taxable income.
The issue may not be your school reported it wrong last year depending on if they report amounts paid or when amounts get applied in the bill. You are still responsible to report them in the correct period. So I'm not sure who erred (example you pay tuition in Dec. 2016 for spring 2017, the school may not put the scholarship in until 2017 but you should have reported it when you reported the expense, in 2016 so when you did the 2017 return you would have TT know it was 2016 amounts during the interview. You should have reported the amount last year as scholarship income which could be used for room & board (the interview will ask about the scholarship and what it can be used for and for what period of time it was applicable to). So the scholarship gets entered, you also enter the offset in room & board section of the interview, it gets used for the room & board you will enter during the interview and they negate each other out but it is rightfully taxable income as all scholarships/ stipends for room and board are considered taxable personal income. The amount of the stipend would not apply towards other tuition you enter (make sure you do enter the amount for room & board during the scholarship interview).
If you have other scholarships, they would apply towards the rest of your tuition & fees you entered (make sure to enter the amount you paid).
You may want to amend your prior year tax return to report the stipend last year correctly. The IRS has been reviewing education credits claimed. If you ever get rejected, that may eliminate your ability to claim them at all in the future. So you want to report correctly.
Education interview is often confusing. Basically you report the revenue when you report the expenses on your return, you do pay taxes on personal income for room & board. You must make sure to enter the expenses when you actually paid them.
The IRS is requiring that 1098-T do all go to cash basis due to the issues students are facing but, they have till 2019 tax year to implement the change.
**I don't work for TT. Just trying to help. All the best.
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