When I ask to explain my taxes, it only explains federal. My taxable income was $407 and I owe $46 to federal. But I owe $504 to state, why that much with my txbl income?

[toby14]

I get a 1098T from college. That is most of my income. That money goes to cover housing though, because I don't live on campus. Why is housing taxed. Would that be taxed if the University got that money for housing? Just trying to figure out why my state taxes are so much.

[MonikaK1]

It depends. If you live in a state that has a penalty for not having health insurance, such as California, for example, TurboTax could have calculated that you owe state tax for a health insurance penalty depending on how you answered the questions in the state interview.

Scholarships can be tax-free or taxable depending on how the funds are spent. Amounts used for incidental expenses, such as room and board, travel, and optional equipment, are taxable.

See IRS Topic 421 for more information.