My situation is exactly the same, except based on what Turbo Tax suggests, I should take the American Opportunity tax credit. In order to do so, I must report something (up to $4000) as a 1098-T (If I don't, and just claim $4000 in qualified expenses, it won't accept it as there is no Taxpayer ID entered for the school). I think what I am supposed to do is: report the 1098 T on my return. Report the 1098Q on my son's return, then ALSO report the 1098-T there (to offset the 529 payments); I then say that $4000 OF THOSE EXPENSES were used to claim the tax credit on the parent's tax form (and I will have to pay tax on those $4000 as they are not covered by expenses , since no double-dipping). Is that correct? Or do I just list $4000 as the amount of tuition on the parental tax form, and the full amount on the student's form, and THEN report $4000 of that was used for the tax credit on the parental tax return? I am tempted to skip all of it and forget the tax credit, though it looks to be about $2500, if I understand the calculation correctly.
