Can I dedut student loan interest payments if it is a foreign bank but the money was used to pay tuition from a US university.

[bernick24]

I loan is from a foreign bank but used used for my bachelors degree. I am a tax resident.

[MargaretL · Accepted solution]

Yes - you can deduct student loan interest from a foreign country, as long as the loan meets the requirements of being a student loan (a qualified student loan is a loan you took out solely to pay qualified higher education expenses) and you have legal obligation to make the loan payments. 

The year-end statement is sufficient enough to claim the interest. When going through Turbo Tax interview, simply enter the name of your Lender and amount in box 1, as if form is received.

Note: all amounts must be entered in U.S. dollars on the U.S. tax return. You may use "government resources" or "external resources" in the below link for conversion:

https://www.irs.gov/Individuals/International-Taxpayers/Foreign-Currency-and-Currency-Exchange-Rates

Additional information:

https://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates

[rvg296]

If I have taken loan from a bank in foreign country to pay for education. How can show IRS without the need of attaching form 1098-E. What should I attach in my application when I send them a mail with my 1040 NR EZ form

[SKA0792]

Can international student loan interest be deducted from state taxes as well, provided that the states have a provision to deduct student loan interests in general? I am specifically looking to get details on Indiana and Illinois. Thank you.

[DawnC]

Since student loan interest is deducted 'above the line', the deduction is taken before calculating adjusted gross income (AGI).    Both Indiana and Illinois start the tax calculation with federal AGI, so the student loan interest deduction will be deducted on those state returns.  

If you take the deduction on your federal return, you will get it on both state returns also.  

You can deduct student loan interest from a foreign country, as long as the loan meets the requirements of being a student loan, on your federal return, so it will be a deduction on state returns that start with federal AGI. 

@SKA0792

[SKA0792]

Thank you for the reply. This also implies that I can deduct the certain portion of the international student loan interest from the state income, when I am filing as a part year resident of Indiana or Illinois, where the part year tax forms do not directly calculate the tax based on federal AGI. Right?

[MarilynG1]

As @DawnC stated above "Both Indiana and Illinois start the tax calculation with federal AGI" (most states do), so you don't enter a Student Loan Interest deduction separately on those state returns.

It has already been calculated into the AGI amount that carries over to your state returns.

For a Part-Year Resident, you will need to Allocate the amount of your AGI that belongs to each state. 

Click this link for more info on Allocating Income as a Part-Year Resident.

[SKA0792]

Agreed. Thanks.

The reason why I asked is, if filing as part year resident of Indiana and Illinois, the tax forms should include Schedule-A (for Indiana) and Schedule-NR (for Illinois), which are used to calculate the State Net income and AGI. In these forms, the the specific portion of student loan interest paid while residing in each state is asked separately, as shown in the images.

I had issues with turbotax premier, where they did not ask me specifically the portion of student loan interest I paid, while I was an Illinois resident. Hence, the entire interest I paid in 2020 was added to the "Illinois portion" in the Illinois Schedule NR tax form and this made my Illinois AGI and tax refund wrong. Whereas, turbotax asked me specifically about the portion of interest I paid while I was a resident of Indiana, hence the calculations where correct and the tax forms where filled right.

[Anmolika Singh]

am i able to just fill the info in the 1098 E section even if i did not receieve that form. I am a resident (calculated on sprintax) and can not use 1040NR, for my foreign student loan. at the same time the foreign bank does not provide a 1098 E.

[ThomasM125]

Yes, you only need to enter the name of your lender and amount of your student loan interest, so you can enter the information requested without having a form 1098-E. @anmolika_Singh