Think of it this way. You are in school over a number of years and sometimes you will get a scholarship awarded to you in a year that is actually designated to pay for a different year of tuition.
Here is an example. Suppose you paid tuition expenses in 2018 of $4000 for the fall session. Your 2018 Form 1098-T would show tuition paid of $4000. Then in early 2019, your scholarship came through and you were awarded $8000, with $4000 to cover 2018 and $4000 to cover 2019. Then your 2019 Form 1098-T will show tuition of $4000, but scholarships of $8000. Therefore, you would enter that $4000 of that scholarship was reported in 2019, but not allocable to a 2019 expense. This will keep that amount from being taxable to you since the scholarship amount exceeded the tuition that was paid.
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