Are interest payments on an international education loan deductible?

[andres-shahidinejad]

Say I am an international, graduate student currently studying in the U.S. and am paying income taxes on my stipend. I have loans from my undergraduate education in a foreign country, and I am currently making interest payments on those loans. Can I apply the Student Loan Interest Deduction to the interest payments I am making for my foreign education loan?

Thank you.

[Marketstar · Accepted solution]

There is no requirement that an educational loan be from a U.S. bank.

A Qualified Student Loan is a loan that was taken out solely to pay qualified education expense that were for the taxpayer, spouse, or a person who was a dependent (defined earlier in this course) when the loan was taken out.

The loan must be paid or incurred within a reasonable period of time before or after the loan was taken out, and for education provided during an academic period for an eligible student.

Loans from a related person or a qualified employer plan are not qualified student loans.

[Marketstar]

If the loan meets the above requirements, you can deduct the interest.

[andres-shahidinejad]

Thank you Vince! I have a related follow-up question: How should I convert interest payments in foreign currency to US dollars? I.e. is there an "official" exchange rate should I use? Also, do I need to present any documentation in order to get the deduction? Or is this something I would have to get from my Chilean bank only in the case that the IRS asks for proof? Thanks again!

[Marketstar]

You would only need documentation in the event of an audit. I will need some time to research your first question

[Marketstar]

You will need to compute the exchange rate for every month you paid the interest. The exchange rate on December 31, 2016 appears to be 655:1. I believe if you "google" the question for each month in 2016, you may get your answer.