Hal_Al
Level 15

Deductions & credits

You won't have a penalty  because the reason  some of the distribution is taxable is only because you diverted qualified expenses to the tuition credit.  That is a penalty exception.  

Technically, when you have a penalty exception, you are suppose to submit form 5329.  TT will not generate that, if you do not enter the 1099-Q and the ed expenses.