Q. Are you saying that the difference should be listed as foreign income?
A. No. It is not foreign income. More specifically, it is not foreign earned income*. So, it is not reported as such.
Taxable scholarship is reported on line 1 of form 1040 with the notation SCH (on the dotted line to the left of line 1). Scholarships must be entered in the educational expenses section to get TurboTax (TT) to make that entry on line 1*. If you enter it in the income section, it ends up on line 8 of schedule 1 as "other income". For most people, that may not matter. Either place is fine. But if you are somebody else's dependent, it may (probably) affect the calculation of your standard deduction(*)(**).
Q. Are you saying that the difference should be reported in the educational expenses section?
A. Yes and no. Normally, you enter the 1098-T and let TT do the calcs. In your case you have a choice, you can enter your expenses, tuition, books etc, and the total scholarship and let TT do it's thing. Or you can just enter the difference, under scholarship.
*Even though taxable scholarship income gets entered on the wages line (Line 1 of form 1040) it is not treated as earned income, for most purposes. Hence, the SCH notation. But taxable scholarship is treated as earned income for the purpose of calculating a dependent's standard deduction (hence, the line 1 entry).
**If you are not (or cannot be) someone else's dependent, for simplicity (the education interview can be complicated) you can enter the difference (net taxable scholarship) as income at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Miscellaneous Income
-Other Reportable income
For description, enter "Taxable Scholarship". That will put it on line 8 of Schedule 1 and end up on line 8 of form 1040.
