Deductions for exchange students

Dear Tax Talk,

I currently provide housing and food for an international student who is not related to me in any way. She is my mother’s friend’s 21-year-old daughter. Can I claim her under the charitable contribution deduction? And how can I do that? Thank you.

— Cheryl

Dear Cheryl,

You will not be able to deduct the support of hosting an exchange student as a charitable contribution since only donations made to certain qualified organizations may qualify for such a deduction.

A qualified organization is generally a corporation, trust fund, foundation or organization that has been granted tax-exempt status by the IRS. They are created by law for the purpose of charitable, religious, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals. Unfortunately, in your case, the student staying with you does not count as a qualified organization, and individuals in general do not qualify as recipients for deductible charitable contributions.

What you may be wondering is how the sponsorship could possibly help reduce your tax liability given that you are providing housing and food, which are real expenses that you are incurring. However, the tax law does not always mirror “real-life” situations, and this serves as an example.

What’s more, to get an exemption or to claim the student as a dependent on your tax return would be a possibility if she were in some way related to you. Under the current tax law, a taxpayer is entitled to an exemption for a dependent who is a qualifying child or qualifying relative, and this is not the case with the student.

It is very generous of you to take care of this young lady, and I’m sure the benefits will outweigh the costs.

Thank you for your question, and all the best to you in the year ahead.

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