Hi, I am on H1B (resident for tax purpose) and my wife on F1 (non resident). We have decided to file jointly. She has received a 1098 T which has $850 in box2, $500 in box5 (scholarship) and also box7 is checked and says "Checked if the amount in box 1 or 2 includes ampunt for an academic period beginning Jan-Mar 2009.

Does this mean we can deduct $500 or $(850 minus 500) from our total income?

THanks a lot

The deduction will be $350 is you claim an education deduction. You may find it is better to claim one of the education credits, be it Hope or Lifetime Learning.