@bigdog7413
I'm sorry. I did not read your original post before replying to you last post.
You probably do have some taxable distribution that your son needs to report. You say " So after adding the 1098T to my tax return we qualified for 2 of the 3 college tax credits." That's not correct. You can only quality for one credit. The most generous of the credits, the American Opportunity credit (AOC) requires $4000 of tuition expense. If you divert $4000 from your $11,703 of total expenses, you no longer have enough expenses to cover the $12,841 distribution. The $784 of tax could well be right.
But there is still a way to bring it down to 0. Instead of making part of the 529 plan earnings taxable, you may be able to make part of the Scholarship taxable. Scholarship income is used in calculating a dependent's standard deduction, but 529 plan earnings do not.
