You are correct in that the same expenses cannot count in both areas, but it is useful to use 529 plan funds with their tax favorable status. These funds are not taxed if all distributions went toward qualifying education expenses, including K-12 tuition, or room and board. The amount distributed will be reported to you on Form 1099-Q. Report this first, before entering Form 1098-T.
Form 1098-T is the form used to report tuition and scholarships as received for qualifying education expenses. Form more information, see: Where do I enter Form 1098-T?
If you already started with Form 1098-T before entering Form 1099-Q, go back to both of these areas of the return and delete each before re-entering them.
TurboTax will optimize the best benefit for your circumstances. For more information, see: The Lowdown on Education Tax Breaks
