Hosting a foreign exchange student can be a gratifying and educational experience for your family as well as for the exchange student: You all learn about new cultures and share experiences. However, no matter how much you feel like your foreign exchange student is "family," the Internal Revenue Service usually won't consider the student your dependent, so don't expect to host a foreign student and get paid. But you might get a charitable deduction.
Since a foreign exchange student doesn't meet the definition of a qualifying child or a qualifying child, you can't claim him as a dependent on your taxes.
Citizen or Resident
To claim anyone as your dependent, the person must be a U.S. citizen or a U.S. resident. Most foreign exchange student's won't meet that requirement, so you won't be able to claim the student as a dependent. For tax purposes, the student can be a resident either by having a green card or by being substantially present in the U.S. However, under the substantial presence test, you can't count days when the exchange student is in the U.S. under an "F" visa, used for students.
Foreign exchange students also run into trouble when it comes to the relationship test. If you're hosting a non-relative, the only way you can claim the student is if the student meets the requirements to be a qualifying relative instead of a qualifying child. Since the foreign exchange student isn't related to you, that means the student must live with you for the entire year, which is also unlikely to happen if you're just hosting for a semester. Even if you're hosting for an entire academic year, the student usually won't live with you for a full calendar year.
Additional Qualifying Relative Criteria
Even if you're still reading because your foreign exchange student somehow meets the criteria so far, there's still a few other hurdles to clear to count as a qualifying relative. First, you must provide more than half the student's support. Support includes food, education, rent, entertainment, medical care and other living expenses. Second, the student can't have more than the value of an exemption in income for the year, before any deductions are counted. For the 2017 tax year, each exemption is worth $4,050. However with recent tax reform, for tax years beginning with the 2018 tax year, personal exemptions have been reduced to $0.
Charitable Contribution Deduction Alternative
If the foreign exchange student doesn't count as a dependent, you might qualify to claim a charitable deduction for some of your costs. Claiming this deduction means that you will need to itemize rather than take the standard deduction on your tax return. To qualify, the student must live with you under a written agreement with a qualified organization as part of the organization's educational opportunities program; the student can't be your relative or your dependent; and the student must be a full-time student in 12th grade or lower. You're allowed to deduct $50 per month that the student lives with you. Any month that the student meets the requirements for at least 15 days counts as a full month. It is important to remember, however, that this is not an exchange student tax deduction.
- Internal Revenue Service: Publication 17
- Internal Revenue Service: Publication 526
- Forbes: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
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Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."