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Tax Law (Questions About Taxes)/Claiming Canadian Student Loan Interest on U.S. Tax Return

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Question
Hello. I am a Canadian that has been living and working in the U.S since 2005. I have been paying interest on my Canadian student loans and was wondering if I could actually report that interest on my U.S. tax return. The loan is an official student loan from the National Student Loans Service Centre and was for a university that does have a U.S. Federal School Code. Someone else had asked the same question on this board and was told that if the loan met those two requirements that the interest could be claimed. If that is true and I can claim the interest then I become confused on whether I convert the interest amount, in Canadian dollars, to American dollars? Thank you.

Answer
Dear Carrie,

  You can deduct your Canadian Educational  loan interest, provided that the school is an eligible school. An eligible educational institution is any college, university, vocational school, or any other post-secondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.

  In your situation, certain Canadian  educational institutions located in Canada do/did participate in the U.S. Department of Education's Federal Student Aid (FSA) programs, what is commonly referred to as FAFSA.

  You need to make sure that your institution was a participant in the FSA program when you attended as a student. Since an educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility afterwards.

  The institution should be able to tell you it was eligible during your study period.

  Assuming that you got a positive answer from your institution, you will need to convert the Canadian dollars to US dollars. You can use the actual date of payment if you know the exact day. You can refer to OANDA (http://www.oanda.com/currency/converter/) for any historical exchange rate.

  If the amount is material, you might have a chance to amend your returns.

  I hope that I have answered your questions. Kindly, do rate my answer.


Abraham Itani, CPA
www.itanitax.com  

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ABRAHAM ITANI, CPA

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TAX QUESTIONS DOMESTIC AND INTERNATIONAL OUTBOUND AND INBOUND. FBAR COMPLIANCE. CORPORATE, PERSONAL, PARTNERSHIP, PASS TROUGH ENTITIES, S-CORPORATION, LLC, TRUST, GIFT TAX, 1120, 1040, LATE FILING, NON FILING, AMT, FTC.

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MORE THAN 10 YEARS OF STATE AUDIT TAXATION, MORE THAN 10 YEARS OF PRIVATE AND PUBLIC TAX EXPERIENCE WITH ITANI ACCOUNTING AND TAX, KPMG AND MNP. DEALING WITH HIGH NET WEALTH INDIVIDUALS, LARGE PARTNERSHIPS, EXPAT., CFC AND PFIC. DEALING WITH TAXING AUTHORITY ON ISSUES OF NON FILINGS AND LATE FILINGS.

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CERTIFIED PUBLIC ACCOUNTANT IN NEW JERSEY AND COLORADO.

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