If the parent claimed the AOTC 4 times, on his education (which is the usual situation), back when he was your dependent, then he is not eligible for any AOTC now that he is out on his own. He doesn't get an additional 4 AOTCs on his own. The 4 time limit applies to his education, not the taxpayer. For example, if the parent only claimed it 3 times, then there is one left for him to claim.
Assuming that's not your case, here's how you enter it in TurboTax (TT).
Q. I suppose I could edit the 1098-T Tuition paid from 5K to 4K (which is inaccurate as far as what the 1098-T states, but it might force the correct math...?
A. Yes, that's basically it.*
On the student's return, he enters the 1098-T with $4000 in box 1 and box 5 blank.
On the parent's return, you enter the 1099-Q and say that the student was "somebody else". At the non dependent summary page, you click the edit pencil. That will give you screens to enter your expenses. You enter only $1000 tuition. You will not enter a 1098-T, since the student is not your dependent.
*The 1098-T is only an informational document. The numbers on it are not required to be entered onto his tax return. If you claim the tuition credit, you do need to report that you got one.
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. If you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that he enters in TT is not sent to the IRS. It's just an entry tool.
