I assume "spending" included all expenses; tuition, fees, books, computer and room and board.
If the student health insurance was mandatory (even if the student had insurance thru parents) then it is a qualified expense for a 529 plan. I assume it was not. So, you are correct, it is a non qualified distribution.
I also assume the $7100 went directly to the school. In that case, it is a qualified distribution for 2024. If not, technically you have a problem (which most people just ignore).
You don't say whether you are eligible for the tuition credit (your income is not too high).
Q. How do I enter this information into TT Deluxe for my 2024 tax return?
A. You enter the 1099-Q, in the 1099-Q section. Later, you enter the expenses in the 1098-T section, including the $7100 for 2025 (since it's on the 1099-Q and was considered paid in 2024). Follow the interview. In addition to entering numbers, you must complete the “Education Information” sub-section. In particular, be on the lookout for a screen “education expenses used for a tax credit”. It will usually be prepopulated. You can change it for the amount you want to allocate to the ed credit, including changing it to 0 if you are not claiming the credit.
A fractional portion of the earnings (about 5%) in box 2 of the 1099-Q will be taxed plus a 10% penalty on the 5%.
