I assume you don't qualify for the education credit because your income is too high, Based on the above you would otherwise qualify.
Parking permit doesn't qualify.
$32900 Tuition
+ 7165 R&B
+ 1482 Books & Computers
= 41547 Total Qualified expenses
- 18050 Paid by tax free scholarship
= 23497 Expenses can be used toward the 1099-Q, Since that is more than the $21,521 distribution; none of the distribution is taxable and the 1099-Q does not need to be reported, at all.
Do not enter either the 1098-T or 1099-Q on her return. Both are only an informational documents. The numbers on it are not required to be entered onto either tax return.
Unless she has withholding in box 2 or box 17, of her W-2, that she wants back, she does not even need to file a tax return.
