MN - M1PR - Household Income

[Prowino32]

Do the grants & scholarships my dependents receive for college qualify as household income on MN M1PR-AI? I claimed education credits with Form 8863, have all scholarship/grant info listed in box 5 of  the 1098-T's, and Turbotax says I qualify for a MN Property Tax Refund. But...

MN Dept of Rev says household income includes:

• nontaxable scholarships, fellowships, grants for education, including those from foreign sources, and tuition waivers or reductions

Need advice, I've heard conflicting opinions.

Thank you.

[KathrynG3]

Yes. Nontaxable scholarships should be included in income for the purposed of the Homestead Credit Refund for homeowners. 

2019 Property Tax Refund Return (M1PR) Instructions see page 9, which is continuation of common examples for Line 5--Additional Nontaxable Income

@Prowino32

[Prowino32]

Thanks for the prompt response.

Guessing you are correct but the link you referenced was from the same source I got my quote in the original post. It does say nontaxable scholarships but does not specify if the scholarship is that of dependents or that of the homeowners. At the same time It does say household income does not include income from dependents, which makes it ever less clear.

I'm also surprised that Turbotax generates the M1PR-AI form and auto-fills some additional income but does not include scholarships listed in box 5 of the 1098-T.  If it should be included that seems like an oversight.

Appreciate the help, thanks again.

[JulieS · Accepted solution]

TurboTax doesn't automatically include the scholarships from box 5 of Form 1098-T on Form M1PR-AI, because the scholarship may be taxable or nontaxable. 

If you used the amount of the scholarship to reduce the tuition available for credit, that is a nontaxable scholarship. You can elect to treat the scholarship as taxable and increase the amount of tuition available for education credits. 

On the federal tax return, if the scholarship is taxable, the income is reported by the student. If it is used to reduce the tuition available for  credit (nontaxable), it is reported on the parent's return, unless the student is not a dependent.

The Minnesota instructions are not completely clear, but I think it more likely than not, they would look at this issue the same way as the IRS does. 

[Bryan Bohnsack]

To clarify, you do not add any dependents scholarships to income in regards to figuring total household income for the MN property tax refund. I prepare taxes in MN and the MN Dept of Revenue has stated this in inquiries in the past.