Q. Would you recommend entering $4500 for box 1 then $4000 for box 5 (even though box 5 on the 1098-T says $7000)?
A. Yes, if you're sure it's non taxable emergency housing assistance grant
Q. Would this be a red flag?
A. No. There's has been no reporting, in this forum, of the IRS trying to match returns to 1098-Ts (other than people claiming the tuition credit actually getting one).
Q. I don’t have an issue reporting the $3000 grant, but definitely do not want to get taxed on it?
A. There's no way to that.
Why don't you qualify for the AOTC? You may qualify for the Lifetime Learning Credit (LLC), which is not as generous. Do you have a tax liability? There is a loop hole for students (or their parents) to claim a tuition credit even if they're on scholarship.
