<p>You can reduce the taxable scholarships by books and supplies required by a program. So a book that is listed as required can be used. In most cases computers can not be used to make scholarship money non taxable. The exception is if the student is in a program that specifically requires that all students in the program buy a computer. There are few that do. IRS 970 has all the rules.</p>
<p>Yes, you still claim the student as a dependent as long as he meets all the criteria to be a qualifying child (relationship, residence, age, support). The support rule states that the dependent must not provide more than half his own support but scholarships and grants do not count as part of the student providing his own support.</p>