She can't be your dependent because she provides more than half her own support. So you can't claim her as a dependent (and the $500 other dependent credit) and you can't claim the education credit for her tuition (because she isn't your dependent).
She can't claim the refundable portion of the education credit because she is (I assume) a full time student under age 24 who did NOT support her self with her own earned income. She cannot claim the other portion because she has no tax liability.
The good news is she does not need to file a tax return and since you can now allocate more expenses to the 529 distribution (1099-Q), you don't need to file the 1099-Q.
Q. Minus $4000k for AOC Credit (or should this be minus the $1921 AOC credit?)
A. It should be $1921. So your total expenses were already enough to wipe out the 1099-Q.
And yes, your AOC calculation was correct.
