You don't say how much was in box 5. 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.
In the TT interview, you will be asked if any of the scholarship was used for room and board. Answer yes. When asked for the amount, enter the amount you need to re-allocate to free up enough tuition to qualify for the maximum tuition credit (usually $4000) qualify for the maximum American Opportunity Credit. Your student will need to report that much scholarship as taxable.
For more specific advice, you'll need to provide your other numbers.
