The rules are fairly taxpayer-friendly in that you can pick and choose which education benefit gives you the most bang for the buck.  See Pub 970 page 61 example #2 (2020):

https://www.irs.gov/pub/irs-pdf/p970.pdf

AOTC is almost always better so you'll likely want to take the credit even if it means paying some tax on the 529 plan distribution.

Rick