While there seems to be some disagreement as to whether the income is taxable in the United States, most online discussions seem to conclude that it is taxable as it is not addressed specifically in any tax treaty between the UK and US. Thus, by default it would seem to be taxable because it is not specifically exempted from taxation by IRS code.
If you determine it is not taxable, you would need to enter the income and then enter a negative adjustment to income and cite the rule in a treaty that would exempt it. If you look on your previous year tax return, you would see a negative entry in line 24(z) of schedule 1 (Additional Income and Adjustments to Income), "Other Adjustments."
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the treaty and the adjustment as a negative number
You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form: Treaty income adjustment
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