I am having a similar issue. TurboTax is not deducting tuition expenses from my child’s scholarship income. I have looked at the IRS publications and this is allowed. We don’t qualify for the tax credit and we did not use 529 money. So the issue you are having does not relate to those two but only to the deduction of qualifying expenses.
I think the issue is with the 1098T form. TurboTax has made a mistake in the coding this year. Last year it worked fine. Sometimes it works to override the TurboTax entries on the underlying forms but usually not in recent years.
My suggestion is to call Turbtax and tell them the issue and site the IRS publication. Insist on it being their mistake. They will work through it. You may be on the phone for hours. I will do the same. This has worked for me in the past. Good luck.
