Doesn't matter that you paid the school any money, since scholarships exceed qualified education expenses. This is how the IRS sees it:
First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income on the student's return. It automatically gets transferred to and included in the total on line 7 of the student's 1040.
Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is included in the total on line 7..
Finally, if there are any qualified education expenses left to pay (which does not include room and board) out of pocket money is applied to qualified education expenses. Only the out-of-pocket monies applied to the qualified education expenses of tuition, books and lab fees is eligible for any of the education credits.
So in your case, there are no out of pocket expenses that were applied to any qualified education expenses. Not a penny.
