Then yes, in this very unusual case (box 1 = box2), $525 is the taxable amount; unless you want to claim the AOTC. In that case you make $4525 the taxable amount*.
You still haven't answered the big question: why is the amount in box 2 the same as box 1. How did you fund the account with pre-tax money. Or the more appropriate question is: have you verified with the account administrator that the 1099-Q is correct. The third version of this question is: is this not really a 529 plan, but actually a Coverdell ESA. Usually, with a CESA, the administrator puts the box 1 amount in box 2 because they don't know the correct amount. You, as the owner, are expected to keep track of your cost basis, and calculate manually the earnings to enter in box 2.
*Earlier you said "If I list the $525.55 as taxable. TT shows that I still get an American Opportunity Credit." That isn't correct, because $526 taxable doesn't allocate any tuition for the AOTC.
It's best if you have some idea of the outcome expected, when you make your entries. You must enter the 1099-Q before you enter the 1098-T. In addition to entering numbers, you must complete the “Education Information” sub-section. In particular, be on the lookout for a screen “education expenses used for a tax credit”. It will usually be prepopulated (sometimes with $10K instead of the more appropriate $4K). You can change it for the amount you want to allocate to the ed credit (usually $4000) . If you don't get that screen, check the student information worksheet. You can change it there (line 17). Make the change in the first column.
