$33,917 - total cost including tuition/fees/room and board (I assume this number is correct)
-$16,000 - paid by scholarship (Use the box 5 number. Room & board scholarship is not tax free)
-$4000 used to claim AOTC
= $13,917 can be used against 1099-Q
Box 1 of 1099-Q shows $16,267
Box 2 is $8,211.10
$13,917/$16,267 =0.856 - so 14.44% is taxable
which is $8211.10 * 0.1444 =$1,186
On your tax return, enter the 1098-T with $4000 in box 1 and box 5 blank or 0. Enter no other numbers. That will give you the maximum AOTC and simplify the entry.
On the student's return, TurboTax can theoretically handle it when you enter the 1099-Q and adjusted 1098-T (change box 5 to 21867) and follow the interview carefully. But, it's complicated and mistakes are frequent.
I would use a simple workaround. Don't enter the 1099-Q or 1098-T, since you know the taxable amount.
Enter at:
Federal Taxes Tab
-Wages and income
Scroll down to:
--less common income
---Misc Income, 1099-A, 1099-C..... (Press start or update)
--On the next screen, select Other reportable income
--On the next screen, click "+Add"
--On the next screen, for description type Qual state (or private) tuition prgm from 1099-Q and enter the amount.
That reports it the same way as the long complicated path with a much higher chance of success.
Since $1186 is less than the kiddie tax threshold of $2700, there should be no kiddie tax (depending on how the $2000 TikTok income is reported), but form 8615 will be generated and filed.
