Tuesday, March 8, 2016

Foreign Exchange Student Tax


If you have a foreign or American exchange student living with you, you might be able to deduct some of the qualifying expenses if the student:
1.    Lives in your home under a written agreement  between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student,
2.    Is not your relative or dependent, and
3.    Is a full-time student in the twelfth or any lower grade at a school in the United States.

You can deduct up to $50 a month for each full calendar month the student lives with you as a charitable deduction to the qualified organization. Any month when conditions (1) through (3) above are met for 15 or more days counts as a full month.

Qualified organization. For these purposes, a qualified organization can be any of these organizations:
·         A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.
·         Certain organizations that foster national or international amateur sports competition also qualify. 
·         War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico).
·         Domestic fraternal societies, orders, and associations operating under the lodge system. (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.)

·         For example, if you are providing a home for a student as part of a state or local government program, you cannot deduct your expenses as charitable contributions.

·         Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U.S. residents and cannot be claimed as dependents.

Qualifying expenses. You may be able to deduct the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the well-being of the student.

Expenses that do not qualify. You cannot deduct depreciation on your home, the fair market value of lodging, and similar items not considered amounts actually spent by you. Nor can you deduct general household expenses, such as taxes, insurance, and repairs.

Reimbursed expenses. In most cases, you cannot claim a charitable contribution deduction if you are compensated or reimbursed for any part of the costs of having a student live with you. However, you may be able to claim a charitable contribution deduction for the unreimbursed portion of your expenses if you are reimbursed only for an extraordinary or one-time item, such as a hospital bill or vacation trip, you paid in advance at the request of the student's parents or the sponsoring organization.

Mutual exchange program. You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country.

Reporting expenses for student living with you. If you claim amounts paid for a student who lives with you, as described earlier under you must submit with your return:
·         A copy of your agreement with the organization sponsoring the student placed in your household,
·         A summary of the various items you paid to maintain the student, and
·         A statement that gives:
a. The date the student became a member of your household,
b. The dates of his or her full-time attendance at school, and
c. The name and location of the school.


We can help you determine which reduction credits you qualify for, and will also recommend the credits that give you the best tax outcome.

If you would like any additional information please feel free to contact me.
Amare Berhie, Senior Tax Accountant

(651) 300-4777, (612)424-1540, (651) 621-5777

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