The program allocates expenses to an education credit first, since that is usually most advantageous to the taxpayer. In your case, since you do not want to tax the distribution and you will not be reporting the expenses (because you are not eligible for the credits) do not report the 1099-Q.
For 529 distributions, if the funds were used to pay education
expenses for the student (beneficiary) do not report the distribution (do not
enter the 1099-Q) and do not use the same expenses for an education credit.
According to the IRS:
“Tax-Free Distributions
Generally,
distributions are tax free if they aren't more than the beneficiary's adjusted
qualified education expenses for the year. Don't report tax-free distributions
(including qualifying rollovers) on your tax return.”
CLICK HERE for IRS Pub 970 Education Credits
