If I received a cash award from my university (not a scholarship or grant), is that award unearned income that should be taxed by my university's state or my home state?

[nitashas]

I received a $3000 cash award from my university in New Jersey upon graduating this past summer and it was not taxed, and I received a 1099-MISC for it as well. I am confused about how to include it in my tax return, especially for state tax returns. I live and work in NY (which is also my home state though I've never filed taxes here, only nonresident tax returns in NJ for my income there) and don't know how to report the $3000 on the NY return versus the NJ return, which state I owe money to and how much?

[nitashas]

What steps should I take to correctly allocate this in my state returns so that this amount is only taxed by NJ and not by NY?

[KrisD]

You say you live and work in NY, but you file NJ?

[KrisD]

If you are a resident of NY, you will be taxed on ALL your income, no matter where earned, however you will get (at least partial) credit for taxes you pay to another state. Do your Federal return first, then non-resident NJ and finally resident NY. The tax you are charged by NJ should be credited on your NY return.
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[nitashas]

I live and work in NY, yes but am filing NJ for wages I earned from campus jobs while studying in NJ and for the cash award. However, I did my federal and NY first and already submitted those! I should do an amended return right? And would the amended NY return take the NJ return into account, even though I haven't filed that yet? I'm sorry, this is my first time trying to do two state returns!

[KrisD · Accepted solution]

The 3,000 would be considered as NJ income since the school that awarded the prize is located in NJ. 

Enter the 1099-MISC on the Federal return:

Click on Federal then Wages & Income 

When you get to the Income section, (you may need to click "Show All Income" first) Scroll down to Other Common Income and Click Show more

Click Start or Revisit for Form 1099-MISC

Enter a description for the non-work income, such as “Cash Award” for the reason and Continue

Click “None of these apply.” at the bottom of the list for “Does one of these uncommon situations apply? And Continue

Answer “No, it didn’t involve work like my main job.” on the next screen and Continue.

Click the year you got the reward and Continue (if you received this income for more than 2 years, the IRS will consider it as self-employment)

Answer “No, it didn’t involve an intent to earn money.” on the next screen and continue.

Do you have another 1099-MISC? Click No and Continue

Click Done.

The income will show as a line item on line 21 of Schedule 1 of the 1040 and not as Self-employment. 

Allocate it onto your non-resident NJ return.