What the program is warning you about is that the 1098-T issued by the school is confusing and sometimes misleading.
It is best to print out the student's online account or statement (for this year and last) and compare.
School years cross calendar years.
Taxes are based on calendar years.
Sometimes the school will bill in December for classes that start January of the following year.
That amount will be on the 1098-T Box 1.
Sometimes a scholarship paying a January class will post in December, when the school bills and that will be in Box 5 on the same 1098-T,
but sometimes the scholarship doesn't post until January of the following year and will be in Box 5 of next years 1098-T.
So you could get a 2024 Form 1098-T with 10,000 in Box 1 and nothing in Box 5.
That would LOOK LIKE you paid 10,000 expenses with no financial help.
That would tell the TurboTax program that you have 10,000 in expenses to apply towards a credit.
Then the next year a scholarship hits the school for 8,000.
You get a 2025 Form 1098-T showing nothing in Box 1 and 8,000 in Box 5.
TurboTax has to assume you need to report 8,000 as taxable income.
IRS Pub 970 is pretty easy to follow and has great examples.
It would be worth looking over.
In TurboTax, everything is entered into the program of the Taxpayer claiming the student.
If there is a credit, that person claims the credit.
If there is reportable income, the student claims the income.
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