Thanks for the advice, I've now been able to get TT to show me the actual returns it wants to file and you're correct: while it shows the $4,500 on Form 1040 line 1 with a "SCH", it's treating it as unearned income, with a form 8615 in the federal return and a 3800 in the CA return. I assume the 30% CA rate is the TCJA rate, ie it's not letting me elect the pre-TCJA rate (still can't believe a CA rate would be that high but whatever..).
The only place where the income comes up in the questionnaire is in connection with the student scholarship questions, so maybe it's some kind of glitch in TT that treats it as unearned. What's really odd too is that if I play around with the number I get some weird results: at $2200 it shows no CA tax due at all, but at $2300 it shows the same $1583 due that it shows at $4500. I'm no expert but that doesn't sound right!
So I think I should probably take your advice and print a CA540 to complete by hand (the number is technically $4,600 so it is above the threshold you cite). The only question then is if there's any downside to leaving the 1040 as TT has prepared it, showing the income as unearned, if it still shows no federal tax due.
Thanks again
