Since you want to use the American Opportunity Tax Credit, allocate 4,000 of the 12,000 for tuition and fees, towards the AOTC, the credit maxes out at 4,000.
You don't say who the 1099-Q was issued to, you the owner of the account, or the student. If the 1099-Q was issued to you, and you don't want to pay the tax, you might allocate the scholarship to the room and board, but remember that only the earnings are taxed on a distribution. Also, if the funds are transferred to the school, the 1099-Q will be issued to the student.
After you enter the forms and click Maximize My Education Tax Break" go back through the "Education Information" section until you get to the last screen, make sure the program is only allocating 4,000 towards the credit. (Or switch to Forms and look at line 17 on the "Student Info Wk".)
Now switch to forms mode and look at "Form 1099-Q" and the student worksheet.
I can't say what the allocation would be since I don't know what your earnings/basis is on the 1099-Q and I also don't know who the 1099-Q was issued to. If the 1099-Q was issued to the student, allocate the scholarship to the remaining tuition and allocate the distribution to room and board. (less tax)
OR I think if you might be able to allocate only 4,900 of the scholarship to room and board, therefore only 4,900 is taxable to the student and the distribution will still be tax-free.
If the student needs to report income, it is reported as "Other Income" line 21 of the 1040, not as unearned income on Form 8814.
CLICK
HERE for IRS Pub 970, Tax Benefits for Education
