State tax filing

This is exactly the problem I'm running into this year.  Did you ever find a solution to this?  We took out the exact amount to pay for our child's college.  But TT is counting all of it as taxable income plus a 10% penalty.  If I manually delete the "income" from the 529 account, then my tax liability goes up!?   - somehow I suspect the tax credit is rolled into this, but it does not seem correct.