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Old 06-17-2016, 12:26 PM
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Join Date: Jun 2016
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Foreign Exchange Student Stipend

Hello,

We will be hosting a Chinese student for the upcoming 2016-2017 school year, and were informed that the stipend we receive will be taxable, 1099 to be sure. I have read through publication 526 where it lists ; food, clothes, transportation, etc. as items possible to record as expenses to offset. So my question is; what are we able to expense and what records would I need to keep for the expenses? Do I need to keep a driving log? How would I break out food, a % of the families total? The room he stays in?

I want to be prepared when he arrives so that we can keep a record but am just not sure what I need a record of and how to go about it.

There is also reference to a $50 per month amount but I think this may only apply to non stipend circumstances?

Please don't just quote pub 526, I read it, that's why I have additional questions.

Thank you,

Bryan



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Old 06-17-2016, 06:20 PM
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Join Date: Oct 2010
Posts: 5,233
We will be hosting a Chinese student for the upcoming 2016-2017 school year, and were informed that the stipend we receive will be taxable, 1099 to be sure. I have read through publication 526 where it lists ; food, clothes, transportation, etc. as items possible to record as expenses to offset. So my question is; what are we able to expense and what records would I need to keep for the expenses? =======>basically in reality, I beelive that
there are quite a lot of people with this kind of extra income, so it should really be no problem reporting the expenses as long as you have records/receipts for it.you basically need to keep receipts, copies of checks. Let me give you one example, say,for example, in the case of rental income, it is a passive activity reported on sch E of 1040(UNLESS you are AKA real estate pro), but in general, if you provide 'substantial services' for your renter,the Chinese student, then you are considered self employed and report the amount on sch C. I n this case of course you claim all rent related expenses, i..e, pty tax, insurance, or etc. but I guess because housing a foreging student is not a trade or business, so you should not be using Sch C, but Line 21 of Form 1040, because you are not in the trade or business of housing students

as said above, in choosing what schedule to use, consider the agreement you signed to participate in the program, you may verify if the document indicates participants could have a profit motive or not, or if they specifically define the rental/volunteer/payment relationship in writing as a 'passive' activity, expense reimbursement, etc.In either case, the IRS has very specific guidelines for deducting expenses. Normal rental deductions, such as utilities and depreciation are not permitted, as they are not considered traceable expenditures . Unfortunately, that means allocated food expenses would not qualify either. Only expenses for food for the student as completely separate cost from personal expenses (ex, paid to go out to dinner - student's cost).
Expenses suggested by IRS are; you may be able to deduct the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the well-being of the student. However,. As said previously, you cannot deduct depreciation on your home, the FMV of lodging, and similar items not considered amounts actually spent by you. Nor can you deduct general household expenses, such as taxes, insurance, and repairs

However, you cannot deduct depreciation on your home, the FMV of lodging, and similar items not considered amounts actually spent by you. Nor can you deduct general household expenses, i.e., pty. taxes, fire insurance and repairs or etc. Remember to keep copies of your expense receipts, agreement with an organization and any other documents related to the student in case you are audited evn if it is rare case.


Do I need to keep a driving log?===>yes; If you qualify, you can deduct your expenses for hosting the student, limited to $50 for each full calendar month of qualification for expenses transportation, medical and dental care, and recreation or etc.

How would I break out food, a % of the families total? The room he stays in? ======>in my opinion, nothing can never be perfectly accurate so you may use nayway that is reasonable; divide his food share by your family?s whole share or You will need to prorate the room size % of the entire house. The taxes you claim on the rental portion will need to be subtracted from the total real estta etaxes you claim on Sch A;


I want to be prepared when he arrives so that we can keep a record but am just not sure what I need a record of and how to go about it.

There is also reference to a $50 per month amount but I think this may only apply to non stipend circumstances? ====>Correct;
As you pointed out here, as you host a foreign exchange student living with you, you might be able to deduct some of the qualifying expenses aslongas the Chinese student lives in your home under a written agreement between you and a qualified organization as part of a program of the organization (i.e., the laws of the United States, any state, the District of Columbia) to provide educational opportunities for the student; the student is not your relative or dependent, and the student a full-time student in the 12th or any lower grade at a school in the US. Once you satisfy the requirements then, you can deduct up to $50 a month for each full calendar month the student lives with you as a charitable deduction to the qualified organization. A month in which the student qualifies for at least 15 days counts as a full month BUT remember; say, you are providing a home for the student as part of your state or local government program, then, you cannot deduct your expenses as charitable contributions.ALSO, if you are compensated or reimbursed for any part of the costs of having a student live with you, then, you cannot claim a charitable contribution deduction. However, you may be able to claim a charitable contribution deduction for the unreimbursed portion of your expenses if you are reimbursed only for an extraordinary or one?time item, such as a hospital bill or vacation trip



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