Q. I expected that she would be paying taxes on the excess portion of the fellowship (if it was high enough to require her to file).
A. There is no excess if the 1098-T Box 1 exceeds Box 5, unless she elects to declare some of it taxable to free up more tuition for the 529 distributions. She can only do that if the scholarship is not restricted to being used for tuition.
Is the scholarship unrestricted? If so, she can declare enough of it taxable that neither of the 1099-Qs will be taxable. And she will pay not tax, because the taxable amount will be less than her standard deduction*.
Q. Instead, the excess is showing up on my return as other income (Schedule 1, Part 1, line z). How do I choose to move this "off of my return" in TurboTax?
A. Delete the 1098-T. But, I don't think that's what you are seeing. $5231 sounds about right for the taxable portion of your 1099-Q.
*Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.
