No, your son is not getting a credit for the AOC. Since the scholarships in Box 5 of the 1098-T is more than the total tuition in Box 1, it creates an income situation, and the amount of income of $4,630 has been added to Line 1 of his 1040.
No there is no way for him to get an AOC credit given the above info you have provided. It doe snot matter if you make changes to your taxes and file differently (don't claim him?). There is no credit available since he received more in scholarships than his total tuition. That is why he has the $4,630 showing up as income.
If he is going to school in CT, he should not have to file a state return for CT. If he worked in CT and withholding taxes were taken out of his for CT, he may want to file to get the amount of withholding taxes back. If he does file in CT, he files as a non-resident. This is true as long has he has not change his state of residence (did not get a driver's license in CT). To delete the CT return, go into the State section and answer the questions until you get to the screen where it lists the states where taxes are being filed. Just click on the "trash bin" symbol next to CT return. This will delete the CT return.
The amount in Box 4 has to do with him withdrawing from classes for the Spring semester.
Adjustments Made For a Prior Year
Box 4 of Form 1098-T reports adjustments made to qualified tuition and related expenses reported on a prior year Form 1098-T in Box 1. The amount reported in Box 4 represents a reduction in tuition paid during a prior calendar year. For example, if you paid Spring semester classes in December and withdrew from classes in January which resulted in a refund, Box 4 reports the decrease in paid tuition due to the withdrawal. The amount reported in Box 4 for adjustments to qualified tuition and related expenses may reduce any allowable education credit you may claim for the prior year. See IRS Form 8863 or IRS Publication 970 for more information.
In summary, if you claim your son as a dependent on your return, he cannot receive the education credit. Based on the information provided, your son is not entitled to an education credit for 2021. Sine your son received more scholarship fund in Box 5 than the total cost of tuition in Box 1, creates an an income situation for him. Even if you were to change the way you file, your son will not receive the credit. As for the Box 4 information, this has to do with him withdrawing from classes for the Spring Semester. If you did not claim the education credit in 2020, then there is nothing that you have to do.
