You are allowed to use room & board, for a 529 plan, even if the student lives off campus.
You are allowed to use food expenses for a 529 distribution, even if the student lives at home. You may use actual cost or the school's meal allowance, for on campus students, whichever is less. That should be pretty close to the $4000 you need to claim the AOTC.
$7335 + $686 + Board allowance - $7545 (used for 1099-Q) = amount available for AOTC.
Don't report the 1099-Q, at all (delete it if you already entered it).
Enter the 1098-T, on your return, with $4000 in box 1 (or "amount available for AOTC" from above, whichever is less). Don't enter any other numbers.
