In our family we have hosted exchange students a number of times in the past. I strongly recommend doing so to anyone who has an interest. It can be a great experience for the entire family. It can also be very challenging and frustrating. So look into it very carefully before proceeding. I have become aware of a number of clients who have recently begun hosting exchange students as well as other people who have expressed an interest. We will not go into detail about the whole process here, just talk about a few of the tax related questions which come up and you should be aware of before you get started.
- There is a possible charitable contribution tax deduction. To qualify the student must be part of a program which is non-profit and you must have a written agreement with the organization. This is usually the case, but there are some for profit organizations arranging exchange programs which would not qualify you for the deduction. The student must be enrolled full time in high school. College students or trade school students do not qualify. If somehow the student qualifies as your dependent, you do not qualify for the deduction.
- The amount of the deduction is a maximum of $50 per month that the student lives with you. You must have expenses which exceed the $50 per month which would include food, clothing, transportation or other expenses for the well being of the student. The student must reside in your house at least 15 days of the month for the month to count.
- If you are reimbursed in any way for any expenses, then you may not count the amount reimbursed. In general reimbursements are not considered taxable income to you. I have never seen a situation where someone was reimbursed more that the costs to host a student, but if that occurred, there is a possibility there could be taxable income.
- If you are hosting a student and your own child has gone abroad as a part of the same organization you may not take the charitable contribution deduction. If your child goes abroad with a different organization or independently, there is no restriction on your ability to take the charitable contribution deduction.