Before answering the questions about the student's tax return, let's talk about your return.
It only takes $4000 of qualified expenses to get the maximum $2500* American Opportunity Credit (AOTC). What TurboTax (TT) should have done was use $2000 of the tuition, in addition to the +/-$2000 of qualified education expenses (computer, books) that you paid to get the maximum credit.
This means that $2000 of tuition will not be applied to the scholarships on her return. That is, $2000 more of her scholarship will be taxable on her return. This gets you $500* more credit and should cost her $0 to $200 depending on what other (than the scholarship) taxable income she has. Her taxable scholarship is $20629 - 11250 + 2000 = $11,379. If that is her only income, none of it will be taxed (it's less than $13,850).
Yes, she enters the 1098-T on her return, even though you entered it.
Q. Is that true that books and computer that we as parents purchased and reported as qualified educational expenses should not be included in her filing?
A. No. Even though you've already claimed those expenses, they need to be entered in TT, on her return, so that TT can do the math. In her interview, you will eventually reach a screen "amount used to claim the education credit". If TT has not prepopulated that with $4000, you should enter (or change to) $4000.
*The AOTC is 100% of the first $2000 and 25% of the next $2000 of qualified expenses.
