Line 2 is qualified expenses. If line 2 is the correct amount of expenses paid in 2016 and line 5 is the correct amount of scholarship or grant received in 2016, then the difference between the amount in box 5 and box 2 must be entered as taxable income on the student's tax return. When the student enters the 1098-T and makes any adjustments to the amounts, TurboTax will then enter the taxable amount on line 7 of form 1040 with the letters SCH on the line.
