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Tuition Remission and State Income Taxes

Forum|Forum|4 years ago
February 3, 2022
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My spouse and I recently graduated from college and are filing jointly this year for the first time. She received tuition remission and some other scholarships which we reported as taxable income. We also have to file for multiple states since I moved from AZ to IL and also worked in MI for the summer. Are those extra scholarships (the scholarships she received past her tuition) supposed to be reported as Illinois income since that's where she went to school and lived all year? Or is our state income only supposed to be our wages, tips, etc from our W-2s in Illinois? Thanks for the help!

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Best answer by KrisD15

If you are a Illinois resident, your Michigan employer should have had you file MI-W4. Illinois and Michigan have a reciprocal agreement so you only pay tax to the state in which you live. You will claim that income on the resident state, which in your case is Illinois. If that employer withheld taxes, you'll need to file a Michigan tax return to get those taxes back. If you paid any Michigan City tax, that tax is not returned, the agreement is between the states, not cities.

The scholarship income is reported on the resident state of the student, so if she was a resident of Illinois, that income is reported on the Illinois state return.

KrisD15Answer

If you are a Illinois resident, your Michigan employer should have had you file MI-W4. Illinois and Michigan have a reciprocal agreement so you only pay tax to the state in which you live. You will claim that income on the resident state, which in your case is Illinois. If that employer withheld taxes, you'll need to file a Michigan tax return to get those taxes back. If you paid any Michigan City tax, that tax is not returned, the agreement is between the states, not cities.

The scholarship income is reported on the resident state of the student, so if she was a resident of Illinois, that income is reported on the Illinois state return.

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