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smtex2021
Returning Member

Taxable scholarship state tax

As a student in Illinois who is a resident of another state and whose scholarship covers room and board, this money is federally taxable. Now, my question is, what part of that scholarship is considered Illinois income. The Illinois website doesn't have an answer to this particular question and my school has been woefully unhelpful in the matter. I have found elsewhere that if it were like an employer paying my housing in Illinois that housing would be Illinois income. However, since this is a scholarship (only a 1098T was produced) I don't know if the same rules apply. The situation is further complicated by the presence of covid this past year. This meant that for a period in 2020 I had classes online from my home state (not Illinois but a state without income tax), so if the situation is like that of an employer paying for housing, would that mean that the "Illinois portion" of that scholarship is the one received for the time lived in Illinois only? Or is the entire scholarship "Illinois income" since it came from an university in Illinois?

Thanks in advance to anyone who might know anything about this.

4 Replies
Hal_Al
Level 15

Taxable scholarship state tax

Q.  What part of that scholarship is considered Illinois income?

A. None.  It gets reported on your home state tax return only.    The employer situation rules do not apply. 

smtex2021
Returning Member

Taxable scholarship state tax

Thank you so much.

Just to make sure I understand correctly then, scholarship money is always reported only to the home state, no matter if the scholarship covers room and board in another state?

Hal_Al
Level 15

Taxable scholarship state tax

Q.  Taxable scholarship income  is  reported only to the home state, no matter if the scholarship covers room and board in another state?

A.  Yes.  The logic behind that answer may not be clear, but that's the way it works.  Essentially, it's passive income and not earned in IL.  

smtex2021
Returning Member

Taxable scholarship state tax

Thanks!

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