Yes, you can enter it that way.
If you used it for room and board
It CAN be applied to a 529 Plan distribution or become "Other Income" on your 1040.
It WILL NOT lower the available education expenses used for a credit
Example, if you have a 6,000 scholarship, 8,000 tuition and use the scholarship only for tuition, you would have no taxable income and 2,000 to apply towards a credit.
If you use 2,000 for room and board, you would have 2,000 taxable income and 4,000 to apply towards a credit.
If you took a 2,000 distribution from a 529 plan as well, you could claim 2,000 room and board which would be tax-free because of the distribution and still have 4,000 for a credit.
IRS PUB 970
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