NORMALLY FOR DEPENDENT STUDENTS- Parents (or whoever claim you) gets the credit if there is one and the student claims the taxable income if there is any.
It is confusing and one of the reasons it is, is that this is one of the few areas where you have options of how you want to report the tax information. The IRS allows you to (legally) manipulate the education expenses and scholarships to get the best tax break.
Yes, you, as the student, need to claim as taxable income the excess amount of scholarship funds received in the tax year that is over the education expenses that were paid in the same year.
Yes, if claiming you on their taxes has no benefit, you can select "No" to the second question. You are still filing as a dependent, but you may get the non-refundable portion of the credit on your return. This is tricky and you should understand what you're doing.
ALSO BE AWARE that you might be able to claim MORE income if that allows a better credit for your parents.
When you enter your W2 and the 1098-T, TurboTax will do the math and tell you what you owe. You might want to use the 1098-T on your parents return, then on yours to see which way is better, but you can only file it one way.
I suggest you look at Pub 970 page 16 to see the examples used by the IRS as to the options you have.
@manii
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