It's not clear why your son is even filing a tax return. If he has enough income to have a tax liability, having him claim the education credit may be an option.
There is a provision that allows your student-dependent to claim a federal tuition credit, from a practical matter it seldom works out. A full time student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. He cannot be supporting himself on student loans & grants and 529 plans and parental support.
But, if the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit. The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable). In your case, you would re-allocate some tuition from the 529 distribution to the AOTC. The 529 distribution earnings become partially taxable. Still, the family usually comes out ahead.
