Box 1 of the 1099-Q is matched to the expenses. If there are not enough expenses, then a portion of box 2 (the earnings) , not box 1 becomes taxable. The taxable portion is based on a ratio of expenses to distribution (the box 1 amount). See example above.
Since, the distribution amount and the expenses on the 1098-T were the same, none of the distribution is taxable....UNLESS, he wants to use some of the expenses to claim a tuition credit. Room and board (even off campus, even at home) are qualified expenses for a 529 distribution. So, student probably has enough expenses to claim a credit and keep the distribution earnings from being taxable.
Q. Turbotax said I could not claim him as dependent. He earned too much and only a part time student. Which is correct?
A. Both are correct. The above answer states that the lack of an income test, for a Qualifying Child (QC), is based on the student being Full Time. Since he is only a part time, he can't be a QC, over 18, then there is an income test (<$4300) to be a Qualifying Relative.
