No, you do not claim room and board (R&B), on your return. R&B are not shown anywhere on the 1098-T. Furthermore R&B are not qualified expenses for the Education/tuition tax credit (that the parent claims on their tax return). But, R&B are qualified expenses for a 529 distribution. You do not, usually, claim all the expenses on the 1098-T on your return. You claim only enough to get the tuition credit. Anything left over can be claimed against the 1099-Q, on the student's return.
Q. The 1099-Q is solely my daughter's name. So, I don't believe I would use a 5329 form
within my daughter's tax return. The 5329 form would be included in my return, correct?
A. No. The penalty form 5329 goes with the 1099-Q. So, if it goes anywhere, it goes on her return. But, it doesn't go anywhere, because she has sufficient expenses (mostly R&B, but also unused expenses [not needed by you] from tuition, books and a required computer). You, usually, only need $4000 of expenses to claim the maximum tuition credit. If you enter everything correctly, in TT, there will be no penalty or tax, for the 1099-Q. But, entering all that is complicated.
So, since you know the outcome (no reportable income, no tax, no penalty, no requirement for the student to file a tax return), just don't enter the 1099-Q. In fact, don't even start a tax return for her. She is not required to file that 1099-Q, just because it's in her name.
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."
