Q, does that mean i should include Spring 2020 expenses when I enter the expenses according to my records
A. Yes, if you are claiming the 529 plan earnings exclusion (1099-Q).
Q. does that mean that TurboTax will enter nothing about the 1099-Q in the tax forms?
A. Yes. You don't need to enter the 1099-Q, at all. But if you do, it goes on you son's return, not yours (your son is the "recipient" since the money went directly to the school).
Q. based on my son's lower income should he qualify for the American Opportunity Credit (AOC)?
A. Simple answer: No. But, it's complicated. If he is not your dependent, he does qualify for the non-refundable portion (up to $1500, not $2500) of the AOC. So, he would have to have some tax liability to get any benefit.
A full time, unmarried student, under age 24, is only eligible for the refundable portion (up to $1000) of the American Opportunity Credit if he supports himself by working (earned income). You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants. It is usually best if the parent claims that credit.
Q. I am thinking to NOT claim my son as a dependent anymore (he is essentially >50% on his own support)
A. It's unlikely that he provides more than half his own support if he's paying for college with a 529 plan. The treatment of expenses paid with distributions from Sec. 529 plans and Coverdell ESAs in the support test is uncertain because of the dual nature of these college savings vehicles and a lack of IRS guidance. The consensus among tax experts is that it is parental support, because the parent is the owner of the plan. It would be helpful to your case it the student is the "recipient" rather than the parent.
The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
Even if you son qualifies as your dependent, you are allowed to forego claiming him (and the $500 other dependent credit) to allow him to claim the non-refundable portion of the AOC.
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