here is how it works:
a) assuming there is NO scholarship in Box 5, $4000 of the expense is used to claim the $2500 of AOTC credit.
b) that leaves $6,600 of qualified expenses.
c) how much was Room and Board, Books not in Box 1 of Form 1098T and computer related expenses. Add that to the $6600
d) if b) plus c) exceeds $9150, the earnings Form 1099Q is Box 2 is NOT taxable And there is no requirement to report it to the IRS. If you look at the 1099Q instructions it states:
Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution.
if this is the case, just delete the 1099Q from TT, put this documentation in a drawer in case the IRS comes knocking.
