I don't think this is correct. You can make nonqualified withdrawals provided the amount does not exceed the cost of education. In this case, you still pay tax at your regular rate on the earnings but do not pay the 10% penalty. This is summarized here, for example: https://www.collegeadvantage.com/blog/blog-detail/posts/2020/11/09/veterans-gi-bill-and-529-plans-wo...
but also detailed in the IRS 5329 form instructions.
I am not sure how to handle this is in Turbotax ... will have to file an amended return from last year and trying to decide what to do this year.
