This assumes the scholarship is NOT restricted:
You essentially have to use a work around in TurboTax (TT). 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.
Enter the 1098-T, exactly as received, on the student's return. When asked how much of the scholarship was used for room & board, enter $7913*. Enter the book expense. 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 his excess scholarship as income on his return (line 1 of form 1040 with notation SCH7913)
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 return . 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.
There's yet another (and simplest) work around. Manually calculate the taxable amount ($7913*) of scholarship and enter the 1098-T, on his return, with 0 in box 1 and the taxable amount ($7913*) in box 5. Enter no other numbers
*9433-4993-527=$3913 Original taxable scholarship amount
3913 + 4000 = $7913 Taxable amount after claiming AOTC
