Studying Abroad This Fall? Make Sure You Know These Tax Implications

If you are planning to study abroad this fall, you have a year of wonderful experiences and adventures ahead of you and, hopefully, a little studying as well. Many students also will be earning a stipend or may have employment while they are abroad, in addition to getting an education. No matter what your circumstances, it’s smart to think about the tax implications of your time abroad. Here are some things that you need to know.

Your tuition abroad may be eligible for the education credit.

If the foreign educational institution participates in the U.S. Department of Education’s Federal Student Aid (FSA) programs, then your eligible costs of attending may qualify for an education tax benefit when you file your taxes if you earn U.S income. Money earned in a foreign country is taxable by that country. If you are working in the country where you are studying, you may need to file a tax return with that country and pay any foreign taxes that are due.

You still owe U.S. taxes on your income if you are a U.S. citizen.

What?!! You mean that if I earn money while I’m out of the country, I have to report that income on a U.S. tax return? Yep, that’s exactly what the law provides. So unless you are doing an internship on Mars, your worldwide income is taxable, and you have to report your income earned abroad to the U.S. government.

If you are a United States Citizen or resident alien living and working abroad, you may be able to exclude all or part of your foreign salary or wages from your income when filing your U.S. federal tax return. The foreign-earned income exclusion is $120,000 for 2023, up from $112,000 in 2022.

You’ll get a foreign tax credit on your U.S. tax return for foreign taxes paid. The U.S. recognizes that if you owe taxes abroad and you owe taxes on the same income to the US, that’s double taxation. That’s why you are allowed to claim a foreign tax credit on your U.S. tax return for taxes you paid to a foreign government on income you also reported on your U.S. tax return.

Your filing deadline is until June 15 (June 17 for 2023) if you are living abroad.

If you are living in a foreign country when your tax return is due in April, you may be allowed a two-month extension until June 15 to file your tax return. Since June 15 falls on a Saturday, the due date for 2023 taxes will be June 17, 2024. However, even though you are out of the country when your U.S. tax return is due, you can always file online.

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