@WImom94 Here is my understanding so far and don’t consider this as tax advice.
- The amount to report as income is $2100 housing scholarship. It is not considered educational expense.
- The amount of $2000 for text books & computer. Here if you have expenses for books and if there is course which mandates computer and if you have bought computer then you can deduct books + computer and the remaining is taxable. For example in my D, she did not spend really any major money for books but got a computer for $500 and books may be $50-100; So $2000-500-100, $1400 will be reported as income.
- In 1098-T, difference of expenses reported - (scholarship amount - minus $2100) is eligible expenses towards educational expenses. For example in my D 1098 (expense $13547, scholarship $14923 which includes $2100 housing scholarship. So around $680 or so amount valid educational expense not covered by scholarship can be used as real educational expenses.
So net $4100 ($2100+2000) as income and net $1280 ($500+100+$680) towards educational expense in her tax return.
But though student need to file tax return on their own for federal, they can not claim themselves for deduction if you have supported > 50% of their support and still you can claim deduction. Remember they are still considered living with you since their stay in college is considered temporary absence. That is a good news. In my D case, since she never worked in CA during summer etc, all that she will file federal and OK state (and CA state). But we will file our federal and CA state for me and my wife but will claim her deduction.
Hoping to file her return by March 4th using tax preparer and will let you know what and how they reported her tax.
Learning experience and not clear this year though I do my tax by my self in the past 30 years.