Don't enter the 10990-Q, at all. You have sufficient expenses to cover it, even if the student (or the parent) claims the American Opportunity Credit (AOC). Despite the fact that he lives at home and is pursuing an online degree, he still has living expenses ("room and board") and those are qualified expenses for a 529 distribution. Since you only need $4000 of room & board, it's safe to assume you have that much.
You are eligible for the full AOC, on your return, if your income is less tan $160,000 (Married jointly) and some of it under $180K. You should claim it on your return (instead of the student claiming it) so that you can retain the $500 other dependent credit. The credit is $2500 (unless your income is too low or phased out above $160K), for you, but only about $1200 for him (at $26,000 income). If you're getting the full $2500 on his return, then you are erroneously claiming the refundable portion.
