If your daughter's scholarships are not restricted to tuition, you change the $1900 to $4000.
She should already be reporting $3139 as taxable scholarship (11,370 - 6331 -1900 = 3139). For you to claim the full ($2500) AOC based on $4000 of expenses, she should report $7139 (11,370 - 6331 - 1900 + 4000) as taxable scholarship. Another way to say that: $4000 of her $6331 tuition is now used for the AOC, leaving $2331 of tuition allocated to scholarship. Her $1900 of books is also allocated to scholarship. 11,370 - 2331 -1900 = $7139 taxable scholarship.
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You essentially have to use a work around in TurboTax (TT). Here's how I would do it. Enter the 1098-T, on your return, but only enter $4000 in box 1. No other numbers.
Enter the 1098-T, exactly as received, on the student's return. Enter book expenses separately. In her interview, you should eventually reach a screen called "Amount used to calculate education deduction or credit". Be sure the amount in that box is $4000 . That will put all her excess scholarship as income on her return.
Be advised some people are saying they're not getting the "Amount used to claim the tuition deduction or credit" screen on the dependent’s . The alternate workaround is to enter $4000 less than the actual box 1 amount, when you enter the 1098-T
There's yet another (and simplest) work around. Manually calculate the taxable amount of scholarship ($7139) and enter the 1098-T, on his return, with 0 in box 1 and the taxable amount ($7139) in box 5. In that case be sure the amount in the "Amount used to claim the tuition deduction or credit", if it show up, box is 0.
