Hello everyone,
I apologize in advance for the length of my post. I have a 2-part question regarding taxable scholarships. Our son received a full scholarship in 2024 while he had received partial scholarships in 2022 and 2023 that were NOT taxable. According to his 2024 Form 1098-T, he received about $30k in taxable scholarships, the difference between Box 5 (scholarships or grants) and Box 1 (payments received for qualified education expenses). He had another $1k of other eligible education expenses (i.e. textbooks and fees) that reduced his taxable scholarship to $29k. He also had about $20k in room and board costs that were fully paid by his scholarship monies. Our Son also worked part time at his college and had about $6k in W-2 wages in 2024. He goes to an out-of-state college in NC (i.e. his nonresident state) and is a resident of FL (i.e. his home state).
My understanding is that since a college student is "temporarily" living in the state they are attending college, they are considered a “nonresident” of that state for purposes of that state’s income taxes (NC for him) and are considered resident of their home state (FL for him). Thus, income earned in the state the college is located should be filed as a "nonresident" of that state.
1- TurboTax ("TT") puts the $29k taxable scholarship on Schedule 1, line 8r (Other income-Scholarship and fellowship grants not reported on Form W-2) of his 2024 Form 1040. I thought any taxable scholarships should show up on line 1 (wages) with SCH written next to it to let IRS know it is from scholarships. Has TT treated the taxable scholarships correctly by putting it on Sch 1, line 8r? To further clarify, this $29k taxable scholarship was NOT reported on his W-2 as taxable wages.
2-Florida, his home state, has no state income taxes. On the other hand, he is a “non-resident” taxpayer For NC tax purposes. According to NC DOR website, NC non-residents must file a return if their 2024 gross income from NC sources exceeds the standard deduction of $12,750 for single filers. Does the $29k taxable scholarship need to be reported for NC state tax purposes? I had heard that the taxable scholarships are only taxed in the home or resident state of the students and NOT in the non-resident state or where the college is located. If that is true, we would not need to include this scholarship as a NC sourced income & therefore, no NC state taxes need to be paid.
Thank you in advance for your time and expertise.
