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How to report a foreign government sourced college support for a resident alien?

I am a Resident Alien (Green Card holder) and my foreign government will start generously supporting my college education this fall, studying at an approved by them US college. Their support has 4 elements:

A: Tuition and Fees, paid directly to my college.
B: Annual stipend for additional educational expenses (books, tools and equipment), paid directly to me.
C: Health Insurance coverage that extends to all this government's nationals who are sponsored in the US (and to their dependents).
D: Monthly stipend for living expenses, paid directly to me.

My government does not issue any US tax forms.

To get this support, I and my Dad are obliged to co-sign a contract promising that I would work for this government back home for at least 4 years post-graduation. If I fail to meet this obligation or fail to earn the college degree then we are both legally bound to repay them all expenses incurred.

Q1: Do these funds represent foreign earned income, a scholarship, a student loan, or a combination?

My best guess is they are part foreign earned income, part fringe benefits and part educational assistance by an employer.

Q2: If my guess is correct should I do the following with TurboTax?:

Report A and B under "Credits & Deductions" subheading "Education Expenses and Scholarships".
Omit C as tax deductible fringe benefit.
Report D under "Less Common Income" subheading "Foreign Earned Income".

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1 Reply

How to report a foreign government sourced college support for a resident alien?

As a possible answer for my own question, I found the following from https://www.journalofaccountancy.com/issues/2004/sep/employerprovidededucationbenefits.html

"According to Treasury regulations section 1.117-4(c), if an employer pays for an employee’s study or research, and those amounts represent payments for past, present or future employment services, the employee must include them in his or her income. Amounts that enable an employee to pursue studies or research primarily for the employer’s benefit also are deemed taxable income. Using the terms “scholarship” or “fellowship grant” and funding education without some consideration of these rules may lead to undesired tax consequences. Indeed, the IRS found its own scholarship program to be a taxable benefit in revenue ruling 76-230 because its student-trainees were receiving the education in exchange for future services."

So it seems B and D are foreign earned income and C is tax-free health coverage. Not sure about A.

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