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Michigan Future Educators Stipend
Please assist:
My daughter is filing as a single taxpayer. She completed her college degree (education program) by student teaching in the fall of 2022, finishing in December 2022. During that fall, the state of Michigan was working out legislation to provide student teachers with a stipend to assist with college expenses. Before 2022 ended, her college tuition bills were paid off, and her total college federal loan indebtedness was a little under $10,000.
She was awarded her stipend during the early part of 2023 - having already graduated - and that stipend of $9,600 was immediately used to pay off the entirety of her college debt.
So...walking through TurboTax, the question is asked: Does the stipend involve work that's like your main job? I obviously answered "yes," since student teaching, and now long-term substitute teaching, are identical. The hit on her taxes was nearly $2,400.
But...if I answer "no," - that it does not involve work like her main job - because she received the stipend AFTER student teaching AND in a different tax year, I am then asked: Did the stipend involve an intent to earn money? Well, was accepting it to pay federal loans an intent to earn? If I then say no to this, the tax liability is reduced to $1,032.
Please help. I am truly baffled.
Thank you very much for your help and insight.
Dave