Education

It looks like you answered the interview questions properly,

HOWEVER, you say the student got scholarships that covered about half of the tuition, but if Box 1 is 29,105 (tuition paid to the school) and box 5 is 29,275 (scholarships that went through the school), Scholarships were MORE THAN tuition. 

Look at the student account records to see if any scholarship money crossed the calendar year. Sometimes schools bill in December but the scholarship post in January or scholarships post in December, but the school takes payment in January. 

SO working with your numbers, your student had 29,105 + 14,000 + 300 = 43,405 expenses less 29,275 scholarships = 14,130 expenses.

You take earnings 40,685 X  expenses 14,130 divided by distribution 66,294 = 8,672 tax-free earnings 

Earnings 40,685 less tax-free earnings 8,672 = 32,013 taxable earnings based on your numbers 

Also be aware that if you tell the program that you would like the credit (which is fine) the program might have the student claim scholarship income to free up expenses for your credit. 

IRS Pub 970 is not difficult to read (as far as IRS Publications go) and illustrates some great examples. 

The IRS wants you to get an education credit if possible. 

[ Edited 04/12/2024 I 1:24pm PST]

@rogerjbos