You are correct, you can take AOC credit as long as you include some of 529 account earnings (interest) in income
But the education credit (AOC) and the 529 plan earnings exclusion have nothing to do with itemized deductions. TurboTax will not make that mistake. The education deduction, as a job expense (an itemized deduction subject to the 2% of AGI threshold), was eliminated beginning with tax year 2018.
Delete and start over. Enter the 1099-Q first, then enter the 1098-T (educational expenses). You will eventually reach a screen "Amount used to calculate education deduction or credit" Be sure the amount in that box is $4000 (assuming you're claiming the maximum AOC).
