Q. In your example, would I put in $8,000 in Box 1, $10,000 in Box 5 as you regularly would, and then input $6,000 that she "spent on room and board" to report that as income?
A. Yes. That is how you tell TurboTax to make that much, of the scholarship, taxable ($6000 in the example). $4000 of the scholarship will allocate to tuition. Leaving $4000 of tuition to allocate to the AOTC.
To make some of the scholarship taxable (re-allocate some of the expenses), you must tell TT how much you want taxable by saying it was used for room &board. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.
