You can both use the 1098-T to enter the expenses. If you claim the tuition credit, you do need to report that you got one (the TurboTax interview will handle this). Your daughter should use the 1098-T because it makes entering scholarship income go smoother.
Although the TT interview can handle it, using a work around in TurboTax (TT) may go easier. Here's how I would do it. Enter the 1098-T, on your return, but only enter $4000 in box 1. No other numbers. You only enter the 1098-T to get TurboTax to check the proper box on form 8863. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS.
If you know how much of her scholarship is taxable; on her return, enter 0 in box 1, at the 1098-T screen and the taxable amount of scholarship in box 5.
If you need TT to calculate the taxable amount; Enter the 1098-T, exactly as received, on the student's return. In her interview, you should eventually reach a screen called "Amount used to calculate education deduction or credit" Be sure the amount in that box is $4000. That will put all her excess scholarship as income on her return.
Be advised some people are saying they're not getting the "Amount used to claim the tuition deduction or credit" screen on the dependent’s . The alternate workaround is to enter $4000 less than the actual box 1 amount, when you enter the 1098-T on the student's return or $4000 more in the box 5 amount.
