Declaring scholarships as income for American Opportunity Credit on taxes

Paying for College
16

here is my situation/ question: I have $1181 in qualified expenses and got $4202 in scholarships and grants. COA is $21K. I need to know if i can apply all of the $4202 in scholarships/grants as income/ unqualified expenses (and have $0 qualified expenses) or if i should have $1181 in qualified exp and $3021 in unqualified expenses/income?
And apparently i can also put in $0 of my $4202 Scholarship/grant for unqualified expenses?

TaxAct in Voluntarily Including Scholarships in Income? https://www.taxact.com/support/22280/2015/voluntarily-including-scholarships-in-income-/?txtSearchValue=Generally,%20scholarships%20are%20ta

"Generally,scholarships are tax free and reduce the amount of education expenses available to claim an education credit. However, a scholarship is not treated as tax free when:

-The scholarship may be used to pay unqualified education expenses, and
-The student includes the scholarship in income (if a return is required to be filed)."

but Publication 970 states that:
“Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expenses can’t exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This amount may differ from the student’s living expenses estimated by the student’s school in figuring the official cost of attendance under student aid rules…”

HR Block says that : “If you’re a degree-seeking student, don’t report scholarship money spent:
For qualified education expenses
At a qualified educational institution…”
http://www.hrblock.com/free-tax-tips-calculators/tax-help-articles/Education/Scholarship-Income.html?action=ga&aid=27033&out=vm

Specifically, i want to know if i can include rent, car payments, and other personal expenses when TaxActwill asks me how much of the scholarship was used for unqualified expenses? From what i understand, whatever amount of the scholarship or grant is left over after taking into account qualified expenses is (has to be) unqualified expenses (income).

so the categories for Scholarship/grants according to TaxAct program are:

  1. Used for unqualified expenses:
  2. Qualified education expenses:
  3. Excess scholarship income:
  4. Taxable scholarship income:
  5. Tax-free scholarships, grants, etc.: