For HPSP stipend, a W2 was received but IRS Pub 970 notes it is not taxable. Does this need to enter this on my tax forms? If so, where?

[kesslerga-10]

All military sites note the stipend is taxable but the IRS and Turbotax info indicate it is exempt and not taxable income.

[DMarkM1]

You are correct the amount is tax free.  Use the steps below to enter the amount in TurboTax and exclude it from taxation. 

Publication 970 states, "Payments you receive for education, training, or subsistence under any law administered by the Department of Veterans Affairs (VA) are tax free.  Don't include these payments as income on your federal tax return."  

Further, according to the VA description of HPSP, "The Health Professional Scholarship Program (HPSP) provides financial assistance to students receiving education or training in a direct or indirect health-care services discipline (Title 38 and Hybrid Title 38 occupations); and assists in providing an adequate supply of such personnel for the Department of Veterans Affairs (VA). HPSP helps the Veterans Health Administration (VHA) meet its need for qualified health care professionals for which recruitment or retention is difficult."

Title 38 is the Veteran's Benefits Law. 

Since a form W2 was issued you need to first enter it as you received it as W2 income in the "Wages & Income" section. Next, use these steps to exclude the income from taxation.

1. "Wages & Income"
2. "Less Common Income"
3. "Miscellaneous Income"
4. "Other Reportable Income"
5. Did you receive other reportable income?  "Yes"
6. Description - "VA Benefit"
7. Enter the W2 Box 1 amount as a Negative (-) number
8. "Continue" and "Done"

This will put a labeled subtraction on Schedule 1, line 8z which will be included on your 1040. line 8 to offset the wage included on 1040, line 1a. 

[kesslerga-10]

Thank you for the reply.   To clarify, this is an Army HPSP stipend, not VA.  Do the same rules apply for tax free? I see the example for VA HPSP in Pub 970. We have the exact same situation for Army HPSP non-veteran in medical school. (tuition paid directly to the school plus monthly stipend for living expenses sent to checking account.) Are both tax free?