Box 5-19,200
- Box 1-16,400
= $2800 Potential taxable scholarships
- 1200 additional qualified expenses
= 1600 Taxable scholarship income before claiming credit
+ 4000 Expenses used to claim AOTC (on your return)
$5600 Net taxable income to be reported on the student's return
Since you know your numbers, you can use a work around in TurboTax (TT), to simplify entry. Here's how I would do it. Enter the 1098-T, on your return, but only enter $4000 in box 1. No other numbers. You only enter the 1098-T to get TurboTax to check the proper box on form 8863. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS.
On the student's return, enter $5600 in box 5 and 0 in box 1.
You say, disregard the trip since it is not qualified expenses. Yes, you disregard it if that grant was included in box 5 of the 1098-T. If it was , in addition to the box 5 amount, it needs to be added to the $5600.
