Can I move scholarship $ to unearned income to increase parents AOTC credit if I payed ALL my unqualifed expenses with 529? $1700 AOTC credit if I don't move anything.

You can claim Scholarship income as EARNED income on your return if this allows the Taxpayer that claims you to get an education credit. 

Education credits are complicated. 

IF the credit your parents can get is the American Opportunity Tax Credit (AOTC), they need 4,000 expenses to get the full credit. 

If what you mean by "Unqualifying Expenses" for the 529 distribution is Room and Board, yes, you can apply the 1099-Q to the room and board expense.  

If the total 529 goes to room and board, the 1099-Q needn't even be entered into the TurboTax Program and you also won't be entering the room and board expense anywhere in the program. 

Parents can enter the 1098-T into their TurboTax program. When they select "Maximize My Tax Break" the program SHOULD suggest the student claim income so the credit can be claimed by the parents. 

There are TWO things you need to keep an eye on

1. The program may allocate 10,000 expenses for a credit, but the AOTC only needs 4,000 and it is the more valuable credit
2. The program may suggest allocating the 529 distribution to the student, but this ends up being "Unearned Income" for the student which often triggers "Kiddie tax" 

If they don't enter the 1099-Q, issue #2 is eliminated

They can adjust the allocated expenses to 4,000 by repeating the education interview until they get to a screen where they can change the 10,000 to 4,000 or they can look at Form 8863 and manually adjust if they are using the Desktop version. 

They can type   letme   into the search-box to change their selection of credits. 

You just report the needed amount of scholarship (up to 4,000) as income.

Remember that you are only claiming the extra you need, so if the expenses (Tuition, Fees, Books and Supplies) are already 3,000 more than scholarship, you claim 1,000. 

Your parent's TurboTax program should tell them what you need to claim. 

Again, for the AOTC that amount should not be more than 4,000. 

To enter the scholarship income:

Sign into TurboTax and continue through until you can start selecting "Wages & Income" located at the top of the screen

Click on Wages & Income

(If the program asks about your W2, select Skip for now )

Select answers to the following questions if necessary to move forward 

Click Add more income 

Scroll down to the VERY LAST option "Less Common Income" and click Show more

On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click START 

On this new drop-down list scroll to the VERY FIRST option "Other income not already reported on a Form W-2 or Form 1099"

Click START

Select YES to the page titled "Other Wages Received" and Continue

Select CONTINUE on the "Wages earned as a Household Employee" screen (enter nothing here)

Select CONTINUE on the "Sick or Disability Pay" screen (enter nothing here)

Select "Yes" on the "Any Other Earned Income" screen and continue

Select "Other" on the "Enter Source of Other Earned Income" and Continue

In Description Box type "SCH" and the amount

Click Done 

This will put the income on your 1040 line 1 where it needs to be.

According to the IRS:

"How you report any taxable scholarship or fellowship grant income depends on which return you file. Form 1040 or 1040-SR. If you file Form 1040 or 1040-SR, include the taxable amount in the total on line 1. If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount on the dotted line next to line 1."

IRS PUB 970