Room and board (R&B) are not qualified expenses for a tuition credit or tax free scholarship.
Q. What do I need to do so that TurboTax shows my total out-of-pocket payments for qualified education expenses was in fact $7500, not $2500?
A. There are two ways to do it. The easy way: just enter the 1098-T with $4000 in box 1 and 0 in box 5*. $4000 of tuition is all you need to get the maximum $2500 credit. The long way, enter the 1098-T and follow the interview, entering additional expenses for books and a required computer; then (as described at the other reply) allocate some of the scholarship to R&B.
*The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income.
If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".
Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.
