Yes, that sounds right and you can go with that if you like.
Depending on what your daughter earned, the additional income might not make a difference in her tax liability.
The distribution is taxable to the taxpayer listed on the 1099-Q. If the program says the student needs to report that, it should give you directions for doing that. If not, then enter the 1099-Q on her return and report the portion used on your program (for education expenses) so she only claims the difference.
There are tons of options with the education section, which makes it confusing.
Additionally, some expenses make only some assistance tax-free. For example, pay Room and Board with a scholarship, and that scholarship is taxable income for the student. Pay Room and Board with a 529 Distribution and the distribution is tax-free.
The IRS is very generous with the education credit and encourages taxpayers to claim the credit if they are eligible, They also suggest allocating part of a scholarship and/or distribution to the student if that results in a more advantageous return for the parent.
You are allowed to claim room and board expenses relating to a student that lives at home. If you wanted to add that, and/or books and supplies, the distribution might be tax-free while you also get the full credit. Ask your daughter about book expense since they can be pretty high.
"Families may also be able to use 529 assets for room and board for students living at home. But the cost allowable must be lower than the cost of living on campus. Some colleges may specify a cost for “commuters” or “at home.” Still, the student at home would only be able to use the 529 savings for the lesser amount."
You can always go back through the education interview and add expenses.
Document what you did and keep everything with your tax file.
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