I assume you are not eligible for a tuition credit this year, either.
You don't say what amount is in box 2 of the 1099-Q. That's the maximum that could be taxed.
What is the parent's marginal tax rate? Only a portion of the box 2 amount will be taxed (see example above). Whereas all of the scholarship, above $8621 (12,400- 350 -3429)* will be taxed (at the student's rate).
Q. Can I change how I enter Room and Board in TT that so it is covered under the scholarships?
A. Yes. The fact that TT has assigned $7099 as taxable scholarship, means it has already included the $6577 actual R&B that you entered. But you can make that number bigger. You will reach a screen titled "Did [student's name] pay for room or board with a scholarship or grant". Answer yes. In the drop box, you may enter any amount up to $24,000 (you are not restricted to the $6577 of actual room and board). TT will treat that amount as taxable. You have to figure out the most advantageous number (it's at least $8621, the amount needed to get his standard deduction to the maximum $12,400).
*A dependents standard deduction is his earned income + $350, but not more than $12,400.
