Yes, the amount of scholarship that is used for room and board is taxable income. It is taxable on the student's own return, not the parents (and in many cases, results in little to no tax.)
When entering the 1098-T on the students return, TurboTax will calculate the taxable amount after you answer the interview questions and indicate the amount that is not for tuition, required fees, or books.
Near the end of the TurboTax interview for this section there will be an opportunity to add in additional expenses (such as books, supplies).
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