Hal_Al
Level 15
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Deductions & credits

Q. Isn't that box specifically for the LLC (hence the "required to be purchased from the school")?

A. Yes, primarily. But not only for that.  TurboTax (TT) will apply that amount to scholarships, before applying it to the LLC.

 

But, whether you enter the book amount in the required to be purchased from the school box  or the not required box, TT will apply the money to the scholarships you entered (usually in box 5 of the 1098-T), unless you tell it otherwise. 

 

Simple example: Box 1 of the 1098-T is $5000, box 5 is $5600.  You enter $600 of book expense.  TT treats all the scholarship as tax free and does not claim the LLC or AOTC.  If you're getting a different result, you've entered something wrong.  Delete the student and start over. 

 

Better yet, The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return (or in TurboTax).  If you know none of it is taxable and you can't claim a tuition credit, just don't enter the 1098-T.  In the example, in the previous paragraph, TT would put nothing about the 1098-T on the actual tax forms. 

 

Unless you have a restricted scholarship (certain amounts must be used for tuition), it's optional how the scholarship money is applied.  That is, you can opt to claim the tuition credit by declaring some of the scholarship as taxable income.  This makes more sense for those eligible for the more generous AOTC, but can work for the LLC, depending on your tax bracket.  

 

 

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