How do I claim a portion of my scholarship on 1098-T as taxable income?

[aidantf8]

My situation: Graduated in May 2024 from a private institution and began working full-time in June and supporting myself fully, so no longer a dependent. I received my 1098-T from my school, and Box 1 is $34,579 while Box 5 is $44,709. Total cost of attendance for 2024 was $46,668; I made a total of $1,959 in payments to the school and the scholarships in Box 5 covered the rest. The 1098-T would imply that $10,130 was scholarships used for unqualified educational expenses (e.g., room and board, student medical fees) and thus is taxable income which I would be liable to pay taxes on.

As specified in Publication 970 (see "Example 3," pp. 16-17), I understand it is an option to claim a portion of the scholarship I received in 2024 as Taxable Income, and it may result in an overall increase in the tax refund (or decrease in tax liability) I get. In my case, it seems that the optimal case would be to claim $12,089 ($10,130 + $1,959) of the scholarship as taxable income, which the IRS will assume was used to pay unqualified educational expenses, and the $1,959 I made in payments to the school will count towards the American Opportunity Tax Credit.

I would like to know how, given my 1098-T, I can claim an amount of my scholarship that I specify (in this case $12,089) as taxable income in order to qualify for the American Opportunity Tax Credit in TurboTax. Would I have to ask my institution for a W-2 of this amount and a revised 1098-T? Or is there some other way in the TurboTax platform to do this?

@AmyC I've read some of your posts and you seem to have a lot of knowledge here--I'm hoping you can help me out.

[KrisD15]

If you enter the 1098-T, go through the interview and click "Maximize My Tax Break" the TurboTax program will do the math and determine if claiming additional income to free-up education expenses is worth it. 

The American Opportunity Tax Credit could help you but the first thing you would need to find out is how many times that credit was taken. 

If you were a dependent before 2024, you'll need to ask the person that claimed you if they took the American Opportunity Tax Credit and if YES how many times. 

If the credit was taken on your expenses, that counts the same as if you used it. 

School usually spans 5 years, so the credit is often not available the year the degree is earned. 

You already need to claim about 10,000 of the scholarship, so another 2,000 might not help. The maximum credit is based on 10,000 expenses.