The $70 tax calculated by TurboTax is not income. It is the tax penalty of 10% calculated on the earnings reported on form 1099-Q.
There should be no penalty if the 1099-Q is used for education expenses, including room and board. You should revisit the entry for form 1099-Q and enter the education expenses (including room and board) paid with the 1099-Q distribution.
Please note that there is be no double dipping with expenses used to claim an education credit or expenses paid for with a scholarship.
Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip! 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, in case of an IRS inquiry.
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