topic If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Income? In the UK, It is not wages and is non-taxable. Do I need to report? in Deductions & credits

If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Income? In the UK, It is not wages and is non-taxable. Do I need to report?

moore.natalie.ja — Fri, 07 Feb 2020 17:29:57 GMT

Re: If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Inc...

SusanY1 — Fri, 07 Feb 2020 18:03:30 GMT

Income earned anywhere in the world is potentially taxable for U.S. citizens and resident aliens, even if it is not taxable in the country where it is paid.

Fellowships and scholarships are not considered wages or earned income, and as such, are not excludable under the Foreign Earned Income Exclusion on the U.S. tax return.

Your fellowship is only taxable to the extent that it exceeds your education expenses or if you are not a candidate for a degree.

We have an excellent article about scholarship income here: Scholarship Income.

Scholarship income is entered in the Education Expense section of TurboTax since only the amount that exceeds your expenses (if any) is what would be taxable.

Re: If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Inc...

moore.natalie.ja — Mon, 10 Feb 2020 14:53:52 GMT

Hello, thanks for your response, but it looks like US tax law differentiates between Fellowships, Grants, and Scholarships for US sources or non-US Sources. Revenue Ruling 89-67 states: 'Grants for study or research activities performed outside of the United States are treated as foreign source. This rule does not apply to amounts paid as salary or compensation for service. See Treas Regulations § 1.863-1(d)(2)(iii).'

My grant is neither paid wages nor compensation for services. This is a post-doctoral fellowship and therefore does not count toward and education expense. Can you please advise on non-US (Foreign) sources of Fellowship and how to record this into Turbo Tax? Thank you.

Re: If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Inc...

SusanY1 — Mon, 10 Feb 2020 22:10:21 GMT

It would be entered as Scholarship Income.

To enter it into TurboTax type in the search term scholarship income in the search tool (magnifying income) and click on the Jump to link that appears in the search results to enter your income.

Re: If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Inc...

sshahid — Tue, 30 Jun 2020 17:43:59 GMT

Hi @SusanY1 !

I have a similar question on this post.

I’m a PhD student, on a studentship — and I receive a stipend... would this be considered earned income as it’s given to me for my research work?

Re: If I received a Fellowship from the UK (Foreign Source), is taxable? Is it Foreign Earned Inc...

SusanY1 — Tue, 30 Jun 2020 18:40:10 GMT

Yes, scholarship income is considered earned income and it is permitted to be excluded as part of the Foreign Earned Income Exclusion (FEIE) as long as all of the other qualifications are met for the exclusion.

@sshahid