Form 1098-T is used to file for the Education Credit and determine if scholarship income is greater than the qualified education expenses and must be claimed as taxable income and whether or not the taxpayer is entitled to claim the Education Credit for the student.
You enter it on the return for the taxpayer claiming the exemption for the student and claiming the Education Expense for the Education Credit.
If box 5 Scholarships is greater than box 1 then questions must be answered regarding any additional education expenses paid that were not included in box 1 in order to determine any taxable scholarship income.
If a portion of the scholarships will be claimed by the student as taxable income, then that taxable income must be entered on the student return as taxable scholarship income.
For additional information, refer to IRS Publication 970, Education Expenses
