Taxable scholarship/Grants

[Ambabje]

Daughter lives on campus in Utah during fall and winter semesters and attends a Utah school. She has excess scholarship/grant income. Is that taxed by Utah (as a Utah source) or by Virginia (home state) or both? Does it make a difference if the scholarship is awarded by the school, is an off-campus scholarship awarded by her job in Virginia payable to the college or is federal financial aid (Pell grant)?

[Hal_Al · Accepted solution]

Q. Is excess scholarship taxed by Utah (as a Utah source) or by Virginia (home state) or both? 

A. Only VA.  It is not considered UT source income.

Q. Does it make a difference if the scholarship is awarded by the school, is an off-campus scholarship awarded by her job in Virginia payable to the college or is federal financial aid (Pell grant)?

A. No.  If it was a UT job, then maybe, depending on the details. 

[Ambabje]

So even though it’s taxable scholarship income (Pell Grant, and the off campus scholarship from her job in VA) that she received because she’s attending a college in Utah (and lives on campus in Utah during those months) it’s still not considered as a Utah source and therefore it is not taxed by Utah and those funds should be allocated to VA to be taxed (where she lives with her parents during the summer and winter breaks)? Do you have an example what then would be considered Utah sourced? Thank you for your guidance.

[Hal_Al · Accepted solution]

Q. So even though it’s taxable scholarship income (Pell Grant, and the off campus scholarship from her job in VA) that she received because she’s attending a college in Utah (and lives on campus in Utah during those months) it’s still not considered as a Utah source and therefore it is not taxed by Utah and those funds should be allocated to VA to be taxed (where she lives with her parents during the summer and winter breaks)?

Q.  Yes. She performed no service, in UT, for the scholarship money. It was granted to her as a resident of another state (VA). 

Q. Do you have an example what then would be considered Utah sourced? 

A. An actual job, performed in UT, even on campus. 

Another example: any interest her bank paid to her (even a UT bank), would be only taxable to her, by VA, as a VA resident.