If a student receives VA Benefits, these are not reported as taxable income. However, if all or a portion of the benefits were used for tuition, that amount would be subtracted from eligible expenses to qualify for the American Opportunity Credit (like a scholarship). There's a question in the TurboTax Education interview for this.
BUT if a student used all or part of their VA benefits for living expenses (student receives the funds, not school), this does not need to be reported in the Education section and they may still qualify for the AOTC.
Here's more info on VA Education Benefits.
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