Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) is tax free. Scholarship amounts that exceed QEE is taxable income, on the student’s tax return. Room & board are not QEE.
If box 5 of the 1098-T exceeds box 1, TurboTax (TT) will treat the difference as taxable income, unless you enter additional QEE at books and other expenses.
If you are entering the 1098-T, on your return, TT will advise you that your student has taxable scholarship income. It will not (and should not) enter the taxable scholarship on your tax return.
