MrShine

Hi, i've given this the long title so that I hope it comes up in google searches because i've got a lot of mixed information from Google and I hope this helps someone in the future.

Does anyone have experience of claiming deduction of student loan interest from their income for calculating taxable income as a non-resident on their 1040NR (with or without EZ)?

As non-residents we don't don't get any exemptions or deductions from our income for the purposes of calculating the amount we pay tax on. However, it seems that we can subtract state tax paid (which is commonly done) but also interest paid on qualified student loans. I've searched on this extensively to work out if my UK student loan (both the normal government one and also a career development loan from a bank) are eligible as loans which I can subtract the interest paid from my US taxable income. Every source (including online tax service forums like 'turbo tax') states that I can, even when it is explicitly mentioned that its a foreign (or UK) loan and foreign (UK) university and paid to a foreign (UK) bank account. Except one post from 2016 on this forum. On the post someone says they asked 3 CPAs and they all said no. I'm not saying that person is lying or anything but I would like to say that I just spoke to the tax law advice department at the IRS and they told me, based on the questions I answered, that I can subtract the student loan interest paid that year from my taxable income. The main qualifiers were: earning less than a certain amount ($80k I believe), that it is an establishment which is part of the Federal Direct Loan Program (mine is, it states it does on my uni website and it has a FAFSA number), that the interest is under $2500 (you can claim up to $2500), that i'm claiming for myself and nobody is claiming for me, that the loan was for education (inc room and board), and that the loan wasn't from a relative. The phone operative said not to include any evidence and that i'd be asked for it if they wanted it. The phone operatives words were "Based on the tax law I would advice that you can deduction your student loan interest, there is nothing to suggest that because it is from another country that you cannot". I've read through a few documents on the IRS website including document 970 and "Can I deduct my student loan interest?" and i've not seen anything saying anything about the funds coming from a non-us source and paid to a non-us bank account.

I'm going to speak to a VITA volunteer today face-to-face too (if I can get a drop in appointment) and will update.

I just thought I would add this here for information and to spark discussion. Also to ask if anyone here has experience with this deduction as a non-resident. It seems odd that it is a box on the 1040NR if the allowance wasn't broad when the other exemption/deductions available to non-residents are so thin and rare.

MrShine

So I just spoke to a VITA volunteer and she said "I don't see why not" but wasn't awfully convincing. I'm going to put it onto my tax forms and report back if it gets pulled up.

MrShine

As a final reply - I submitted my paper 1040NT-EZ with a deduction for student loan interest based on my UK student loans for my UK university courses paid for by a UK bank (COOP)/government (SLC). I received my tax refund 4 weeks later by direct deposit. Haven't heard anything else and no further questions. I didn't itemize the deduction, just put about $1000 of interest paid in the box and deducted that from my income. This isn't to say I may not have done something wrong and just haven't been caught - unfortunately there are few guidelines for this but the sketchy details I do have suggest I am allowed to do this. I hope this helps someone in the future.

Hotscot

It doesn't really get examined in detail by a human unless the system flags something. If there's an issue they generally have three years to address it.