Dear Tax Talk:
My wife attended the University of Madrid last summer. Is her tuition tax deductible like it would be at an American university?
While there are numerous tax benefits for higher education expenses, the rules don't necessarily provide for the
student enjoying a summer in sizzling Madrid at taxpayers' expense.
There are basically three types of tax benefits
for higher education expenses:
- The Hope Credit
- The Lifetime Learning Credit
- The tuition and fees deduction
While your wife may have had an excellent opportunity to study in Madrid, the rules governing these benefits
could be subject to taxpayer abuse if a tax credit or deduction were allowed for just any foreign university studies.
In order to qualify, the tuition
and fees have to be paid to an eligible education
institution. An eligible educational institution
is any college, university, vocational school
or other postsecondary educational institution
eligible to participate in a student aid program
administered by the Department of Education. It
includes virtually all accredited public, nonprofit
and proprietary (privately-owned, profit-making)
postsecondary institutions. The educational institution
should be able to tell you if it is an eligible
educational institution. Certain educational institutions
located outside the United States also participate
in the U.S. Department of Education's Federal
Student Aid, or FSA, programs.
While the rules do include certain
foreign schools, a search of the Web finds very
limited choices. Foreign education could still
be deductible as an itemized deduction if it is
work-related. Chapter 12 of Publication
970 provides additional detail on claiming
education expenses as work-related.