Tax Lessons Abroad for International Students Studying in the United States

Studying abroad in the United States is a time of excitement and great experience for not just higher learning, but for life as well. That said, as much education as students receive while studying abroad, they also must learn about the U.S. tax regulations that affect them and their studies.

Whether earning income or not, almost every international student studying in the U.S. is required to comply with their US filings obligations if they temporarily reside in the U.S. on a student visa. However, there are key issues that these international students must identify to ensure they file correctly, due to either their physical presence in the U.S., receipt of scholarship funds and /or income earned while in the U.S. In addition, they must continue to meet the conditions for maintaining a student visa in the U.S. Failing to do so may deem them a U.S. resident for U.S. tax purposes and be taxed on their worldwide income.

Each international student temporarily in the States under an F, J, Q, or M visa, must first identify whether they are a ‘resident alien’ or a nonresident alien; this will not only affect whether they’re exempt from the substantial presence test – meaning their visa does not count towards the 183 days that is the trigger for conversion from nonresident to resident alien – but also the type of tax form they file. Without identifying what type of alien they are, then there could be further complications that may affect their studies.

For international students studying in the U.S. on a scholarship, there’s another level of consideration that must be taken into account to determine the taxability of the scholarship they receive. For instance, only "qualified scholarships" (which is a defined term) are not taxable. However, under the U.S.-Canada Treaty, amounts received (that are otherwise taxable under local law) by a Canadian resident student temporarily present in the U.S. for the purpose of full-time education or training is exempt from US tax, if the amounts received are from outside the U.S. for the purpose of the student's maintenance, education or training.

What must also be stressed is that if an international student fails to file the proper tax forms as part of their study, then re-entry into the States can be affected, resulting in a change to one’s visa status, which may prevent them from further study.

The best way for students to avoid tax issues is to maintain compliant with U.S. tax filing and reporting obligations. “A tax professional can assist you in determining what tax forms you must file, along with how to remain compliant so your studying continues, uninterrupted,” Flores highlights. Creating clarity around the type of visa one has, along with the type of tax forms a student must file will help international students stay out of trouble with the U.S. tax authorities.


Catalyst Senior Tax Manager Larry Flores spoke to Peter Watts from the Alberta Morning News on News Talk 770 on the Corus Radio Network regarding the tax implications of studying in the U.S.

Listen to Larry's interview here

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