Out of state scholarship and stipend in the time of Covid

[akrehm]

My daughter received a scholarship for room and board for the fall semester of '20, as well as a stipend for being a research assistant from an out of state university in Michigan.  Two questions related to this:

1) Since last semester was 100% remote learning due to Covid, she never actually set foot in Michigan for either the learning or for the work she did (all was done remote from our home state of Colorado).  Which state(s) does this income need to show up in?  Her W2 for the RAship did have some Michigan taxes removed so I'm guessing she has to file that there, but Colorado may want to claim the income as well since the work was done from here....

2) If she is filing her own taxes (both federal and state(s)), is there anything I need to show on my taxes related to the scholarship?  Or does all the stuff from 1098-T go on her forms?

Thanks in advance for any help you can provide.

[AmyC · Accepted solution]

1. File a MI nonresident return and a CO resident return.*

2. If you are not claiming her, there is nothing on your return. If you are claiming her as a dependent, then you would claim any education credit.

*Your resident state taxes all income but gives a credit for income taxed by another state.  Please carefully follow these directions.

You will need to prepare the states in a special order. You may need to delete both states and begin again.

1. First, prepare your non-resident MI return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
2. THEN prepare your resident state CO return and it will generate a credit for your income already being taxed in the non-resident state.
3. The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

[akrehm]

Thank you very much for your help!