Study Abroad: Claiming Travel Expenses For Education Credit

Studying abroad can be an enriching experience, but it can also be expensive. Students and their families may be wondering if they can claim any tax credits or deductions to help offset the costs. The short answer is that while eligible students can claim certain deductions and credits for their study abroad expenses, travel costs such as airfare and accommodation are generally not eligible for the education credit. However, tuition, fees, course materials, and other enrollment expenses may qualify as deductible expenses.

Travel costs are not eligible for education credits

If you are studying abroad, you may be able to deduct some of your educational expenses when filing your taxes. However, travel costs are not eligible for education credits. This means that expenses such as airfare and accommodation cannot be written off, even if you are taking classes that count toward a degree, diploma, or certificate.

Education credits are available for qualified education expenses, which typically include tuition, fees, and other related expenses for an eligible student. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution that can participate in a student aid program administered by the U.S. Department of Education. This includes most accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions.

To be considered a qualified education expense, the amount must be paid for tuition, fees, and other related expenses for an eligible student. These expenses must be required for enrollment or attendance at an eligible educational institution. Eligible expenses may also include student activity fees mandated for enrollment or attendance. For example, an activity fee that all students must pay to fund on-campus organizations and activities would qualify.

For the American Opportunity Tax Credit (AOTC), expenses for books, supplies, and equipment that the student needs for a course of study are also included, even if they are not paid directly to the school. For instance, the cost of a required textbook bought from an off-campus bookstore would qualify. However, it is important to note that not all courses qualify for the education credits. Expenses for sports, games, hobbies, or non-credit courses do not qualify unless they are part of the student's degree program or help the student acquire or improve job skills.

While travel costs related to studying abroad are not eligible for education credits, there may be other deductions or credits that you can claim. For example, if your travel is work-related, you may be able to deduct these expenses on Schedule A as an itemized deduction or on Schedule C. Additionally, there are tax benefits specifically for expats pursuing higher education, such as the American Opportunity Credit and the Lifetime Learning Credit, which can help offset their US tax burden.

Tuition and fees are eligible

If you are a United States resident, tuition and fees are eligible expenses to claim on your taxes. However, this is only applicable if the educational institution is based in the US or is eligible to participate in a student aid program administered by the US Department of Education.

Tuition and fees are considered qualified education expenses, which are amounts paid for tuition, fees, and other related expenses for an eligible student. These expenses must be paid by you, your spouse if filing jointly, a student you claim as a dependent, or a third party. You can claim an education credit for these expenses paid by cash, check, credit or debit card, or with money from a loan.

If you pay with a loan, you can claim the credit for the year you pay the expenses, not the year you get or repay the loan. Additionally, if the student withdraws from classes, you can still claim the credits for any amounts not refunded.

It is important to note that only tuition and certain fees are considered eligible expenses. Other expenses such as room and board, transportation, and other personal costs are not qualified deductions. If you receive any scholarships or financial aid, your claimable tuition amount will be reduced by that amount.

For tax purposes, the program fee for study abroad students is typically divided into tuition and room and board. Only the tuition portion is tax-deductible, and this deduction is only applicable if the student is participating in the study abroad program.

To determine your eligibility for claiming tuition and fees as deductions, you must meet certain income requirements. If you report earnings of less than $65,000, or $130,000 if married and filing jointly, you can deduct a maximum of $4,000. If you earn more than $65,000, the maximum deduction is $2,000. Additionally, you are disqualified if you are married and file separate returns or if your modified adjusted gross income exceeds $80,000, or $160,000 on a joint return.

What is the American Opportunity Credit?

The American Opportunity Tax Credit (AOTC) is a federal tax credit that allows you to lower your tax bill by up to $2,500 if you paid that much in undergraduate education expenses last year. The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.

How the American Opportunity Tax Credit works

The American Opportunity Tax Credit lets you claim all of the first $2,000 you spend on eligible education expenses, plus 25% of the next $2,000, for a total of $2,500. Qualified expenses include:

• Tuition, fees, and other enrollment expenses paid to a qualifying educational institution
• Course materials such as books and supplies (this applies even if you did not buy these items from the school)
• Non-academic student activity fees paid to the school as a condition of enrollment

Who can claim the American Opportunity Tax Credit?

The American Opportunity Tax Credit is for undergraduate college students only. To qualify, students must meet the following criteria, according to the IRS:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half-time for at least one academic period beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Not have claimed the American Opportunity Tax Credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

What the American Opportunity Credit is worth

The American Opportunity Tax Credit lowers the amount of tax you pay. For example, if you owe $3,000 in taxes and get the full $2,500 credit, you’ll only have to pay $500 to the IRS.

Yes, it's refundable. You can still receive 40% of the American Opportunity Tax Credit's value — up to $1,000 — even if you earned no income last year or owe no tax. For example, if you qualified for a refund, this credit could increase the amount you'd receive by up to $1,000. That's why the American Opportunity Tax Credit is typically the best education tax break for students and their families.

What is the Lifetime Learning Credit?

The Lifetime Learning Credit (LLC) is a provision of the U.S. federal income tax code that lets parents and students lower their tax liability by up to $2,000 to help offset higher education expenses. This credit may be claimed year after year, without a limit. However, it cannot be combined with the American Opportunity Tax Credit in the same tax year.

The Lifetime Learning Credit is for qualified tuition and education-related expenses paid for by eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses, including courses to acquire or improve job skills.

To be eligible for the credit, a student must be enrolled at an educational institution considered eligible by the Internal Revenue Service, and they must be taking higher education courses towards a degree or a recognized educational credential that provides or improves job skills.

Finally, the student must be enrolled at a qualifying institution for at least one academic period that began within the tax year for which they’re claiming the credit. The IRS defines “academic period” as a semester, trimester, quarter, summer session, or other period determined by the school.

The credit is worth up to $2,000 or 20% of the first $10,000 of qualified education expenses, each tax year, depending on your modified adjusted gross income (MAGI).

To claim the LLC, you must complete Form 8863. Attach the completed form to your Form 1040 or Form 1040-SR.

How to claim a continuing education tax credit

If you're taking any continuing education classes, you may be eligible for the lifetime learning credit, which can lower your tax bill by up to $2,000. This credit is available even if you're not working towards a degree.

To claim the lifetime learning credit, you need to meet the following requirements:

• You must be paying for continuing education, part-time classes, or graduate school costs.
• The classes must be offered by an eligible educational institution, including any college, university, vocational school, or other postsecondary educational institution eligible to participate in a U.S. Department of Education student aid program.
• You will usually receive Form 1098-T from the eligible institution reporting the qualified expenses you paid. If you don't receive this form, you may still claim the credit if you have documentation to prove the expense and you requested a 1098-T.
• Your modified adjusted gross income (MAGI) must be within certain limits. For the 2023 tax year, your MAGI must be $80,000 or less if you're filing as single or head of household, or $160,000 or less for joint filers, to claim the full credit. You can claim a partial credit if your MAGI is between $80,000 and $90,000 as a single or head of household filer, or $160,000 to $180,000 as a married joint filer.

To claim the lifetime learning credit, complete IRS Form 8863.

It's important to note that travel costs for study abroad programs are not eligible for the education credit. However, if your dependent is studying at an eligible university, their tuition and other costs would still be eligible.

Frequently asked questions