If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Income? In the UK, It is not wages and is non-taxable. Do I need to report?

Forum|Forum|6 years ago
February 7, 2020
5 replies
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SusanY1

Alumni - Intuit

Income earned anywhere in the world is potentially taxable for U.S. citizens and resident aliens, even if it is not taxable in the country where it is paid.

Fellowships and scholarships are not considered wages or earned income, and as such, are not excludable under the Foreign Earned Income Exclusion on the U.S. tax return.

Your fellowship is only taxable to the extent that it exceeds your education expenses or if you are not a candidate for a degree.

We have an excellent article about scholarship income here: Scholarship Income.

Scholarship income is entered in the Education Expense section of TurboTax since only the amount that exceeds your expenses (if any) is what would be taxable.

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moore.natalie.jaAuthor

Level 2

Hello, thanks for your response, but it looks like US tax law differentiates between Fellowships, Grants, and Scholarships for US sources or non-US Sources. Revenue Ruling 89-67 states: 'Grants for study or research activities performed outside of the United States are treated as foreign source. This rule does not apply to amounts paid as salary or compensation for service. See Treas Regulations § 1.863-1(d)(2)(iii).'

My grant is neither paid wages nor compensation for services. This is a post-doctoral fellowship and therefore does not count toward and education expense. Can you please advise on non-US (Foreign) sources of Fellowship and how to record this into Turbo Tax? Thank you.

SusanY1

Alumni - Intuit

It would be entered as Scholarship Income.

To enter it into TurboTax type in the search term scholarship income in the search tool (magnifying income) and click on the Jump to link that appears in the search results to enter your income.

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