Correct, the one exception is if room and board being deductible, is if there was a Coverdell ESA or 529 plan distribution. In that case, the cost can be deducted from the distribution before calculating the taxable portion of the earnings.
The room and board cannot be deducted against ordinary income. As such, entering it will not result in your federal tax going down. Instead it will prevent your federal tax from going up for entering the 1099-Q.
The TurboTax interview and calculation for 1099-Q is complicated and it's easy to make mistakes.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board to cover the distribution. 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. 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 also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
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."
