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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2822
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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In what state do students pay income tax on taxable room and

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In what state do students pay income tax on taxable room and board and stipends? We are a Catholic Diocese and have men studying in the seminary at our expense. Our diocesan headquarters are in Illinois and some students study in Illinois, but most are throughout the country and Rome. We pay all expenses for our seminarians including tution (tax free) but also taxable room and board and give them taxable cash stipends for other incidentals. If a student who was a resident of Illinois attends a seminary in Nebraska, for example, does the student pay tax in Nebraska for the taxable room and board and stipends while in school? I have always thought that you pay state income tax in the state where you are residing when you receive the income. An Illinois seminarian attending a Nebraska seminary insists that, since he is a student, that he is still a resident of Illinois and should pay tax in Illinois. He says he was told that by the Illinois Department of Revenue. Therefore, I need an authoritative citing to respond to him.

bkb1956 :

Thank you for allowing me to be of service to you. Your student is correct. The state a student pays taxes to is determined by his residency. If a student is a resident of Illinois, but attends seminary school in Nebraska, the student would file his return in Illinois. Both the IRS and state taxing authorities are in agreement on this for residency purposes. However, if your seminary was located in Nebraska and your student was a resident of Nebraska but attending seminary in Illinois, he would file his return in Nebraska. Please let me know if you require further information or clarification. Also, please remember to rate my answer to you as this rating is an important part of being an expert on this website. Thank you.

Customer:

Is there any IRS or state regulation that you could provide to back up the opinion?

bkb1956 :

I will research the exact information and send it to you in a few moments. Thank you.

bkb1956 :

Below is the information from the Illinois Department of Revenue website:

bkb1956 :

Section 201(a) of the Illinois Income Tax Act (“IITA”; 35 ILCS 5/101 et seq.) imposes a tax measured by net income “on the privilege of earning or receiving income in or as a resident of this State.”


According to Section 1501(20) of the IITA, the applicable definition of a “resident” is defined as


(A) an individual (i) who is in this State for other than a temporary or transitory purpose


during the taxable year; or (ii) who is domiciled in this State but is absent from the State


for a temporary or transitory purpose during the taxable year.


In addition, Section(NNN) NNN-NNNNof the Illinois Administrative Code (“IAC”) discusses residency in greater detail. For example, Section(NNN) NNN-NNNNd) focuses upon the taxpayer’s “domicile” in determining residency for Illinois Income Tax purposes:


(d) Domicile. Domicile has been defined as the place where an individual has his true,


fixed, permanent home and principal establishment, the place to which he intends to return whenever he is absent. … An individual can at any one time have but one domicile. If an individual has acquired a domicile at one place, he retains that domicile until he acquires another elsewhere.

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Customer: replied 3 years ago.


Thanks,


 


Wayne


 

It has been my pleasure to be of service to you. Thank you for the positive rating.

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