Opening your home to a foreign exchange student is certainly a meaningful and enriching experience, but it also comes with important tax considerations that families should know about. In this article, Staff Accountant Jenna Leid breaks down eligibility for deductions, which expenses do (and don’t) qualify, and the documentation required at filing time to help families stay informed.
If you or someone you know is interested in hosting a foreign exchange student, you may be eligible to claim a tax deduction for qualified expenses incurred for the duration of the period in which the student lived in your home. There usually aren’t major costs associated with hosting a foreign exchange student so as a result it is not a huge deduction. Nonetheless, this is something that taxpayers should be aware of if they do choose to become a host family or if it is something they are considering in the future, especially for those with itemized deductions exceeding the standard deduction, it can help reduce a taxpayer’s overall tax liability on their return.
To be eligible to claim qualifying expenses, the following must be met:
- A written agreement is established between the taxpayer and a qualified nonprofit placement organization, such as a 501(c)(3), to provide educational opportunities for the student.
- The student isn’t a relative or dependent of the taxpayer.
- The student is a full-time student and in any grade 1-12 at a school in the United States.
If the above criteria are met, a deduction of up to $50 a month for each calendar month the student has lived in the taxpayer’s home can be claimed on their tax return. Meeting the above criteria for 15 or more days during the month would be considered to apply for the entire month. To take this deduction, the taxpayer would report the total amount of unreimbursed qualified expenses as a charitable contribution reflected on Schedule A of their tax return.
To help clarify which expenses qualify for this deduction, provided below are some common examples of both qualified and non-qualified expenses. This list is not exhaustive. Taxpayers should review any expenses incurred that were not listed below to ensure they meet the applicable requirements for taking this deduction.
Some examples of expenses that would be considered qualifying expenses:
- Cost of books and tuition
- Medical and dental expenses
- Entertainment
- Although this is typically not a deductible expense, it does qualify for purposes of claiming this deduction
- Any general expenses incurred that were used for the purpose of caring for the student while they were living with you such as:
- Food, clothing, or any other personal items provided for the well-being of the student
Some examples of expenses that would be considered as non-qualified expenses:
- Unnecessary travel or vacation costs
- Spending money
- Reimbursed expenses
- Expenses that would be incurred regardless of hosting a foreign exchange student
- Mortgage, utilities, property taxes, etc.
If you are eligible to claim this deduction on your tax return, be sure to keep record of all documentation in connection with hosting a foreign exchange student.
Eligible taxpayers should provide a copy of the following with their tax return:
- The written agreement from the sponsoring organization.
- A written document including the name of the exchange student that stayed in your home, the date the student became a member of your household, details of the name and location of the school the student attended, and the dates of the students’ attendance at this school.
- A summary of the qualifying expenses in relation to hosting the student.
Under the One Big Beautiful Bill Act (OBBBA), charitable contributions exceeding 0.5% of a taxpayer’s AGI can be included towards total itemized deductions. While this particular deduction alone likely wouldn’t put someone over the standard deduction threshold, taxpayers who already itemize may gain a small additional tax benefit if they qualify.
If you have any questions on eligibility or qualifying expenses, please reach out to us for guidance.
