<p>The 1098-T is used by the parent to determine eligibility for the AOC. If the scholarship was sent directly to the school they should have included the $500 in the 1098-T calculations. The AOC is only for qualified expenses (tuition, required fees, books). If you used a Coverdell account for the qualified expenses you cannot claim the AOC due to the tax favorability already provided for a Coverdell. If you paid qualified expenses (cash/loans) then you can claim the AOC. If the grants/scholarships were used for unqualified expenses (room & board) then they are taxable to the student.</p>