East Lansing MI city tax on scholarship/fellowship??

[Gwaihir]

OK. My MSU Grad student son, living in East Lansing and working at MSU, has both a W2 and fellowship/scholarship income (SCH on line 1 of federal 1040) from MSU.  On MSU's W2, they withheld East Lansing city tax correctly, but obviously not on the scholarship money which comes via 1098T (scholarship in excess of tuition).  

Is he liable for East Lansing City tax on the scholarship/fellowship SCH money, since it's not "earnings" and has no W2, but is income?   Or can he exclude it on the East Lansing city income tax form? 

Thanks for any help or advice from those who've gone before. There have to be zillions of MSU students and parents who've been through this. 

[KrisD15 · Accepted solution]

Yes, there are cities in Michigan that tax scholarships as income if the scholarships show as income on the student's Federal return. 

Grand Rapids and East Lansing are two of them. 

East Lansing Link

[Gwaihir]

The vile hounds.  🙂 

Thanks for the clarification! I had seen the lists of what's included and excluded, but didn't see anything quite as explicit on scholarships as I was hoping for.  So thanks. 

[TaxesStinkAlways]

Are you sure?  Reading the EL Tax code....W2 definitely taxable, Scholarship doesn't look like it.  We paid it last year but now I'm not sure.

https://www.cityofeastlansing.com/1834/Taxable-Income 

§ 141.613. Types of nonresident income to which tax applicable; extent and basis of tax.

Sec. 13.
• The tax shall apply on the following types of income of a nonresident individual to the same extent and on the same basis that the income is subject to taxation under the federal internal revenue code:

(a)  On a salary, bonus, wage, commission, and other compensation for services rendered as an employee for work done or services performed in the city. Income that the nonresident taxpayer receives as the result of disability and after exhausting all vacation pay, holiday pay, and sick pay is not compensation for services rendered as an employee for work done or services performed in the city. Vacation pay, holiday pay, sick pay and a bonus paid by the employer are considered to have the same tax situs as the work assignment or work location and are taxable on the same ratio as the normal earnings of the employee for work actually done or services actually performed.

(b)  On a distributive share of the net profits of a nonresident owner of an unincorporated business, profession, enterprise, undertaking, or other activity, as a result of work done, services rendered, and other business activities conducted in the city.(c)  On capital gains less capital losses from sales of, and on the net profits from rentals of, real and tangible personal property, if the capital gains arise from property located in the city.

[ReneeM7122]

Here is a TurboTax article with more information about scholarships.

Here is an IRS link that discusses Scholarships, Fellowship Grants, and Other Grants.  The IRS has a tool that will help you determine if the fellowship should be included as taxable income or not.  

If you do need to enter your scholarship income in TurboTax, in your return, go to Federal Taxes, Deductions & Credits, Education and the program will walk you through the information about your scholarship income.  

@TaxesStinkAlways