Carl provides you with clear and accurate advice to follow. In addition, I suggest that you become familiar with the American Opportunities Tax Credit (AOTC), which can provide up to $2500 in credits. Reducing your tax bill by $2500 can be a good deal. For basic information on the AOTC, including qualifications and income limits, see https://www.irs.gov/credits-deductions/individuals/aotc
The scholarship money that is spent on the tuition it is excluded from income. However, some scholarships (you need to check your case) can allow the student to essentially spend the scholarship money on support and thus allows paying the tuition using other funds. Once you hit the $4000 limit for tuition and course-related books, supplies, and equipment, then don't spend more than that from your own funds if you can avoid it. This action increases the part of the scholarship money that becomes taxable to the student. However, that action can also make you, the parent who supports the student, eligible for the tax credit. If eligible for the tax credit, the thousands of dollars provided by the credit is often a much better deal than the extra tax that the student has to pay. Final item, keep track of money spent on course-related books, supplies, and equipment because these expenses count toward AOTC expenses and are not usually paid out of the scholarship funds.
