As an international student in the US working on my OPT, can I claim returns on student loan interest that I took from a bank in my home country?

[surag0107]

I'm an F1 student from India, currently working on my OPT. I'm currently repaying my student loan that I took from a nationalized bank in India. Am I eligible to claim returns on the interest I pay to the bank, when I file my 2017 taxes with the IRS?

[DS30 · Accepted solution]

Yes if your loan meets the eligibility requirements (see below), then you will be able to claim the foreign bank student loan interest.

Please note - If you are on a F-1 visa, you will be exempt from the Substantial Presence Test for the first 2 (if non-student) or 5 (if student) calendar years that you are in the US. This means that you are considered a non-resident aliens for US tax purposes.

Here is a link to the IRS website for Form 1040NR, U.S. Nonresident Alien Income Tax Return

(You can still claim student loan interest on your 1040NR.)

https://ttlc.intuit.com/replies/5227101

[surag0107]

I'm on my first year OPT, which means I'm still a non-resident alien for tax purposes. Does this mean I'm not eligible for returns on the interest paid?

Thanks.

[DS30]

No you can still claim the student loan interest on your 1040NR.

[surag0107]

Thank you so much for your prompt response. The reason for my confusion was because in your initial response you'd mentioned that "if you are filing as a resident alien for the 2017 calendar tax year, and your loan meets the eligibility requirements (see below), then you will be able to claim the foreign bank student loan interest." But you've cleared that with this response. 🙂

Thanks,
Surag

[DS30]

Sorry - I edited my answer to be all inclusive for both residents and nonresidents

[surag0107]

Thank you.

One final clarification - if I were to fill my form 1098E, I would be converting my home country currency to US dollars?

[DS30]

yes - you can use the IRS average rate of exchange. Here is the link - <a rel="nofollow" target="_blank" href="https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates">http...>

[surag0107]

@TurboTaxDeeS  So I asked the same question on Sprintax, via "Ask Stacy", and they have a different response. So if I go to <a rel="nofollow" target="_blank" href="https://www.sprintax.com/meet-stacy.html">https://www.sprintax.com/meet-stacy.html</a> and type in "My student loan is from my home country, not from US, can I still claim it on my US tax return?", this is the response I get:

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No - an eligible student loan is only if it’s taken from a US bank account. To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. If you paid interest on a student loan in 2016, you may be able to deduct up to $2,500 of the interest you paid. Generally, you can claim the deduction if all the following requirements are met.

Your filing status is any filing status except married filing separately.
Your modified adjusted gross income is less than $80,000.
No one else is claiming an exemption for you on his or her 2016 tax return.
You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that:
The person filed a joint return,
The person had gross income that was equal to or more than the personal exemption amount for that year (for 2017 it is $4050), or
You could be claimed as a dependent on someone else's return.
The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan.
The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out.
The person for whom the expenses were paid or incurred was an eligible student.
If you have further questions please click here to chat live with the Sprintax team.
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This confuses me since TurboTax and Sprintax are partners, and yet I get opposing views. Could you kindly clarify?

Thanks,
Surag

[dheepchandar1991]

I exactly have the same question as above. Hey Surag did you figure out the answer if yes can you please share with me.

[zr04]

Hi Surag,

I have the same question. did you get a solution to this? Could you explain the steps you took? Thank you! 🙂

[LinaJ2020]

Per IRS, you can claim the student loan interest you pay to a foreign bank as long as the foreign school you went to is an eligible institution that participates in a student aid program administered by the U.S. Department of Education.  Click here to verify: https://fafsa.ed.gov/spa/fsc/#/SEARCH?locale=en_US