Scholarships and Grants would count whether the income is taxable or not.
According to the state of Wisconsin:
“ "Household income" includes certain nontaxable income such as social security and supplemental security income (SSI) benefits; pensions and annuities; unemployment compensation; capital gains; contributions to IRAs and Keogh, SEP, SIMPLE, and deferred compensation plans; court ordered support money and maintenance payments; scholarships, fellowships, and grants; military compensation; interest on U.S. government securities; county relief benefits; cash public assistance (Wisconsin Works (W2), kinship care, etc.); and all depreciation and depletion claimed in computing Wisconsin taxable income. This list is not all-inclusive. Refer to the Schedule H, Homestead Credit Claim, lines 9a through 11j, and the Schedule H and H-EZ instruction booklet for a list of "household income."
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