Thanks for the very detailed response. I'm glad you asked the last question: although TurboTax is giving her $626 in income because of the $2000 scholarship, she will still not owe tax on it because her income is under the standard deduction amount. I am still mystified as to how any of the $2000 is considered income. For the record: Box 1 ($5899) , Box 2 ($2000), no other scholarships, no 529 payments in Box 5, scholarship was from university and applied directly to tuition, daughter is full time student and owner of 529, total in Box 1 of 1099Q matches amounts paid for tuition, room, board & books.
