Scholarship income is taxable income on a federal return as well as on a California State return unless it's offset by educational expenses reported in a 1098T. If there is more scholarship income than educational expense, the excess is taxable income. If there is no 1098 T, then the entire scholarship amount is taxable in both jurisdictions.
To report your 1099 NEC scholarship amount, you can enter it two ways so you won't be reporting in Schedule C.
If You received a 1098T and claim an educational credit:
- With your return open, go to federal
- Deductions and Credits
- Education
- Expenses and Scholarships (Form 1098T)
You may have already recorded the 1098T so you will continue until the reach a screen that says Scholarship and Financial Aid. Here is where you enter the scholarship information. Next question asks if you received a scholarship or grant. Here you will say yes. then a drop down appears, you will enter the amount of the 1099 NEC either as other scholarships and grants or Employer-provided Assistance.
If you did not receive a 1098T, go to:
- Federal
- Wages and income
- 1099 MISC and Other Common Income
- Income from 1099 NEC
- When you enter the reason for the income, indicate it is Scholarship income
- The next screen is critical. It asks if one of These uncommon Situations Apply. Here you will say "This is not money earned by an employee or self-employed individual.... Selecting will keep this 1099 NEC from being reported as self-employed income,
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