I am assuming the following:
1) Your daughter is in fact, reporting all the education stuff on her return.
2) Your daughter selected the option for "I can be claimed on someone else-s return"
If she's getting that credit, it's because she incorrectly indicated the following on her tax return.
A) My parents qualify to claim me. (this is correct)
B) My parents are not claiming me(this is incorrect)
Remember, weather you actually claim your daughter as a dependent or not is irrelevant. If you *qualify* to claim her, then it doesn't matter if you claim her or not. She must still select the option for "I can be claimed on someone else's return".
Now, in your case since she is claiming all the education benefits anyway, if you choose to NOT claim her, then she *can* qualify for the AOC credit if she selects as per item B above. It's a kind of loop hole in the tax law that allows this. But it's not really a loophole so-to-speak. Either you get to deduct $4050 from your taxable income for claiming her as your dependent, *OR* she gets the AOC if you don't claim her. But not both.
