So does this not apply in the situation of scholarship money being over tuition.
Not quite that simple. Since the student is being claimed as a dependent, the student's standard deduction is The *lower* of
$12,300
**********OR**********
The student's earned income plus $350.
So if the student has $5000 of earned income and $1000 of taxable scholarship income that was not used for qualified education expenses, the student's standard deduction is $5,350. They will be taxed on the remaining $650 of left over unused scholarship money.
