Room and board are also qualifying expenses for a 529 distribution, if the student was half time or more. MIL can claim it, even if the student lives at home with her spouse. But you are limited to the lesser of your actual costs or the school's "allowance for cost for attendance" (basically what on campus students pay for Room & Board).
To get the maximum Lifetime Learning Credit (LLC), you need to claim $10,000 of educational expenses. Books and a computer are eligible expenses for the 529 distribution, but not the LLC.
As the other reply said, you need to coordinate with MIL to allocate expenses for the best benefit to the family. If MIL may have to pay a little tax, on the distribution, but there will be no penalty (claiming a tax credit, for the same expense, is a penalty exception.
After deciding how to allocate expenses, reply back if you need help entering in TT. There are simple workarounds available.
