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Canadian resident students/parents seeking IRS higher-education tax credits for Canadian Universities

IRS offers two higher-education tax credits. The American Opportunity Tax Credit provides up to $2,500 worth of credit for each student, 40% of which is refundable. The credit is equal to 100% of the first $2,000 of college tuition and qualified expenses and 25% of the next $2,000. The AOTC only applies to the first four years of post-secondary education.

 

The Lifetime Learning Credit only provides a maximum $2,000 of credit (20% of up to $10,000 of eligible expenses) per family. None of it is refundable, meaning it can only be used to offset the taxpayer’s tax liability, and any additional credit amount is lost.

 

Can tuition payments to a foreign university, say in Canada, qualify for the education credit? To qualify for the credit, the tuition must be paid to any accredited public, non-profit or proprietary post-secondary institution eligible to participate in the student aid programs administered by the Department of Education. This would rule out foreign educational institutions because they don’t qualify for the student aid program administered by the Department of Education.

 

Note that while International schools do not participate in the U.S. Department of Education’s grant programs, they do offer financial aid (loan only) to attend an international school. For example, in Toronto, York has a FAFSA school code of G07679

There are additional rules for each credit, but you must meet all three of the following for both:

  1. You, your dependent or a third party pays qualified education expenses for higher education.

  2. An eligible student must be enrolled at an eligible educational institution.

  3. The eligible student is yourself, your spouse or a dependent you list on your tax return.

Watch IRS videos: "What do you Need to Claim an Education Credit?" and "What you need to prepare your tax return."

You cannot claim an education credit when:

  • Someone else, such as your parents, list you as a dependent on their tax return

  • Your filing status is married filing separately

  • You already claimed or deducted another higher education benefit using the same student or same expenses (see  IRS info on: ‘Education Benefits: No Double Benefits Allowed’)

You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes.

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