QUESTION: $2100 of his scholarship/grant money was a housing scholarship. His 1098-T shows $6953.10 in box 2 and $8600 in box 5. The additional expenses I have records of = $269.93. I'm not sure how the $2100 affects the number I show on my return for box 2 and box 5.
REPLY: $8600 - 2100 = 6500. This means that $6500 of the scholarship was used to cover the $6953.10 in box 2. 6953.10 - 6500 = 453.10 was considered paid by you. $453.10 + 269.93 = $723.03 of expenses can be used to claim an education credit.
But, see the discussion about the "loop hole". You can claim $4000 of qualified expenses, for the credit, if the student claims $3276.97 (4000-723.03) + 2100 = $5376.97 as income on his return.
