Taxpayer has a scholarship that CAN be used for room and board, but not REQUIRED to be used for that. Can I reduce the scholarship $ used for the credit?

[eztacks]

Taxpayer has a scholarship that CAN be used for room and board, but not REQUIRED to be used for that.  Can I reduce the scholarship amount used for the credit? (if yes, how is it entered in Proseries)? Is it then considered a TAXABLE scholarship?  

[Just-Lisa-Now-]

DID it get used for room and board?

[eztacks]

Yes he did use it for room and board (or at least I can allot it to that), and it is allowed to be used for that purpose, but not REQUIRED.  The IRS guidance says it can be allotted for that purpose if REQUIRED to be used for room and board.

[TaxGuyBill]

Publication 970 does not stipulate that it must be "required"; if it is allowed, you can do that.

[taxiowa]

You still have to enter it in the line titled "required to be used" because Proseries does not have another handy place to put it and has never reworded line.  Enter on student worksheet Part V, line 4.

[TaxMonkey · Accepted solution]

Yes, you can choose to make more of the scholarship taxable in order to increase the credit.