529 and shcolarship daughter a dependent.--how do i do this?

Yes, this does get complicated when you have both the 529 Plan 1099-Q and a 1098-T.   If you are claiming your daughter as a dependent, then it is reported on your return.   

What should I do with Form 1099-Q? If you used all the money you withdrew from your QTP or Coverdell ESA to pay for qualified education expenses, and meet other IRS requirements, the distributions aren't taxable and you don't need to report them as income. Just file your 1099-Q with your tax records.

You are not required to report a 1098-T and most people not eligible for the credit do not report the 1098-T. 

You can just not report the 1099-Q, at all, if your student beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip! 

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

General Discussion of 1099-Q/1098-T

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 

The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.

Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.  However, in your daughter's case her scholarship amount in Box 5 exceeds the tuition amount in Box 1 so there will not be a  education credit, but the excess will be reported as other income on your return.

Normally, you can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses she claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.

But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets her an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "her" money that paid the tuition.

In addition, there is another rule that says the 10% penalty is waived if she was unable to cover the 529 plan withdrawal with educational expenses either because she got scholarships or the expenses were used (by her or the parents) to claim the credits. She'll have to pay tax on the earnings, at her lower tax rate (subject to the “kiddie tax”), but not the penalty.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 

Example:

  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship***

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q (usually on the student’s return)

Box 1 of the 1099-Q is $5000

Box 2 is $2800

3000/5000=60% of the earnings are tax free; 40% are taxable

40% x 2800= $1120

You have $1120 of taxable income  

**Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit. Most people come out better having the scholarship taxable before the 529 earnings. 

In your case, there is going to be income to report.   One thought what is your income level, are you above the phase out for income, if so, then you would not be able eligible for the education credit and would not have to report the 1098-T.