You cannot use the same dollars of tuition to both claim the AOC and to justify the 1099-Q distribution. That would be double-dipping.
Tuition paid from student loans is considered as paid out-pocket,
In general, if your daughter is eligible for the AOC, the best solution to maximize tax benefits is to apportion the first $4,000 of qualified education expenses to use for the AOC and the balance for justification of the 1099-Q withdrawal. Please note that for the purpose of the 1099-Q, you can count room and board. This way, you will get a credit of $2,500 for the AOC.
In your case you apportion $4k of tuition for the AOC to get the tax credit of $2,500), leaving $41k of tuition and $15k, which together more than covers the distribution of $49k from the 529.
As the remaining tuition and room and board, more than covers the 529 distribution, you do not even need to enter the 1099-Q on your tax return, You just keep it in your tax records with the proof of payment in case of an IRS audit.
In fact, on form 1099-Q, instructions to the recipient read: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
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