Most airlines, AA included, have introduced much more lenient change and cancellation policies due to covid. When did you originally book the flights and what are the flight dates? It should be no problem to cancel with AA and at least get a full credit to use on future flights, depending on the scenario you might be able to get a full refund.
If you cancel the flight and get a credit, you definitely cannot use this towards your taxes & fees on an award ticket (so
#2 is out of question).
AA Trip Cancellation & Coronavirus: Discussion & Questions