If your real problem is that TurboTax (TT) is calculating tax on the 529 distribution, it's not because of the half time status. There is a glitch in TT. It assumes that you use some of the tuition money to claim a tuition credit and that reduces the amount available for the 529 plan earnings exclusion.
Go through the education section again. When you get to the screen that says “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it.
Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.
