Q. Where is this option in TT to take advantage of this Tip?
A. There is no specific place to do that. You need to know to make the adjustments.
On the parent's return, the simple way to do that is enter the 1098-T with $4000 in box 1 (the maximum amount needed to get the full AOTC credit) and box 5 blank.
Enter the 1098-T, exactly as received, on the student's return. Enter book and computer expenses separately. In his interview, you should eventually reach a screen called "Amount used to calculate education credit" (or similar wording). Be sure the amount in that box is $4000. That will put all his excess scholarship as income on his return (line 8r of Schedule 1).
Be advised some people are saying they're not getting the "Amount used to claim the tuition credit" (or “Education Expenses used for a Tax Credit”) screen on the dependent’s interview. Check the student information work sheet (part VI, line 17) to verify it was entered. If not, the alternate workaround is to enter $4000 less than the actual box 1 amount, when you enter the 1098-T.
There's yet another (and simplest) work around. Manually calculate the taxable amount of scholarship and enter the 1098-T, on his return, with 0 in box 1 and the taxable amount in box 5. In that case the amount in the "Amount used to claim the tuition credit" box is 0 (if it comes up).
