Yes. You can claim the American opportunity credit even though you used distributions from the 529 plan to pay for tuition. However, claiming the American opportunity credit could cause the earnings from the distribution to be subject to tax, if the adjusted qualified education expenses are less than the distribution.
Your distribution is made up of your
contributions which is your basis (box 3 of 1099Q) and also your earnings (box
2 of 1099Q). The contributions are never taxable.
To
determine your adjusted qualified education expenses, you would take your
qualified education expenses for 2016 and subtract any tax free educational
assistance that you receive, such as scholarships. You would also subtract the amount of expenses that were used to
calculate the American Opportunity credit.
For
additional information on qualified education expenses, please refer to page 56
of pub 970 under the headings, "what is a qualified tuition program?"
and "qualified education expenses". https://www.irs.gov/pub/irs-pdf/p970.pdf
For
additional clarification on calculating your adjusted qualified education
expenses and to calculate the amount of taxable earnings from your
distribution, please refer to page 59 of pub 970 under the headings,
"coordination with American opportunity and lifetime learning
credits" and "example 2".
