When claiming the education credit you must enter the information as reported on Form 1098T. This Form is reported to the IRS and will be matched to your return so not reporting it would be incorrect.
If you have scholarship money left over after covering your qualified education expenses, you'll need to include that amount as part of your gross taxable income. That means scholarship money counts as income when calculating your tax liability when used to pay for: Room or board. Utilities. Your Form 1098T Box 5 shows the amount of scholarships and grants that were paid directly to the school for the student's expenses. Scholarships and grants may reduce the amount of qualified expenses the student can use when calculating a credit.
Taxable Scholarship
Guide to Form 1098
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