First, if the students are your dependents, and you want TurboTax to do the math, enter ALL 1099-Q and 1098-T in your TurboTax program and your program will tell you what (if anything) the students need to claim.
If there is taxable distributions, the person listed on the 1099-Q is liable for that tax.
If you want to do the calculation, the taxable portion of the distribution is-
(this will need to be done for each student separately)
Total of all expenses less scholarships =XXXX
Earnings times expenses (XXX) divided by distribution = tax-free portion (XX)
Earnings less tax-free portion (XX) = taxable earnings
You can enter this calculation as "Other Income" on the return(s).
Pub 970 is pretty easy to read and has some great advice.
It even talks about having the student claim income in order to free up an education credit for the parents.
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