Since your son’s 1098-T shows $6,000 in qualified expenses (Box 1) and $9,000 in scholarships (Box 5), the $3,000 excess ($9,000 - $6,000) is taxable because it was likely used for non-qualified expenses like room and board. This amount should be reported as taxable Income. See IRS Topic 421 and IRS Pub 970.
Click here to use the IRS Tool: Do I include my scholarship, fellowship, or education grant as income on my tax return?
You can also reallocate $4,000 of the scholarships to taxable income, freeing $4,000 of qualified expenses for you to claim the American Opportunity Tax Credit (AOTC). This would increase his taxable amount to $7,000 ($3,000 excess + $4,000 reallocated), but you could claim up to $2,500 in credits by filing Form 8863. TurboTax can help with this when you enter the 1098T,
For more, see TurboTax Guidance on Taxable Scholarships. See TurboTax Help on 1098-T Forms.
