Room and board (R&B) and books and computers are not included in box 1 of the 1098-T. Books and computers and R&B, even if the student lives at home, are qualified expenses for a 529 plan distribution. From the numbers you provided, your 1099-Q is fully covered by expenses. Just don't enter (or delete) the 1099-Q, in TurboTax (TT)*. The TT interview is complicated.
Furthermore, if you have at least $4000 in books and computers and R&B expenses**, you are eligible for the American Opportunity credit (assuming your income is not too high). You should enter the 1098-T on your return.
Your report nothing on the student's return; not the 1098-T, not the 1099-Q.
*You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You cannot double dip! When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records.
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
** Books and computers and R&B expenses are effectively covered by the 529 plan (and/or scholarship) freeing up $4000 of tuition to be claimed for the tuition credit, on your return.
