My daughter is on a partial scholarship that exceeds her tuition and expenses at an out of state school. She has 20K in scholarship money in box 5 and 14k in tution in box 1. She has approximately $1500 in other qualified expenses books, lab equipment etc. As I understand it my daughter has about $4,500 of taxable income. I seem to have the federal figured out but the state tax has me puzzled. She goes to school in Arizona and we live in Michigan. She earned 2K last year working in Michigan during the summer and the only income she made in AZ would be her scholarship money that is taxable. When we do her state taxes TT pulls her federal AGI into the Michigan State tax, and she has to pay Michigan State tax, but to me the scholarship money wasn't earned in Michigan so should I manually edit the AGI in the Michigan return to remove the scholarship income then file an AZ state tax for the scholarship money? Or what is the right way to handle this situation?
Thanks
