Box 1 and box 2 of the 1099-Q are both $38,612? How did that happen? That's so unusual, that my first reaction is: "That's not even possible". Are you sure it's not box 3 that has 38612 and box 2 is 0? Is Thomas Gore the student or the parent?
That said, your numbers add up $8616* of the distribution being non qualified (12,616 to get the $2500 AOTC or $10,616 to get only $2000 AOTC). 8616/38612 = 22.314% of the earnings are taxable and subject to the 10% penalty. You may allocate some of the tuition to the AOTC. That much more earnings will be taxed, but not subject to the 10% penalty. But, if box 1 and box 3 (of the 1099-Q) are the same (and box 2 is 0), then nothing is taxable and the 1099-Q can be ignored. Enter the 1098-T, to collect the full AOTC.
There's no clue to where you got $525.55 as an amount to treat as taxable.
Reply back with verification of the earnings amount and I'll tell you how to enter this. I'll assume you want to allocate $4000 of tuition to the AOTC (you want $2500 AOTC, not $2000).
*You have $29,996 of qualified educational expenses (QEE)(15,233 + 14,625 + 138). $38,612 - 29996 = 8616.
