No, you are not doing something wrong. As long as you make withdrawals only to pay for qualified higher education expenses, you won't pay income tax. The computer was not a qualify educational expense. IRS Pub. 970 page 11, defines qualified expenses as tuition, required enrollment fees, and course materials that the student needs for a course of study as a condition of enrollment or attendance.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"