Can You Claim American Opportunity & Lifetime Learning Credits While Studying Abroad?
Yes, you can claim both the American Opportunity and Lifetime Learning Credits while studying abroad at eligible foreign universities. Over 400 foreign universities qualify for U.S. federal student aid, making them eligible for these valuable education credits. The claiming process remains the same whether your student attends university domestically or internationally, using Form 8863 to secure up to $2,500 annually through the American Opportunity Tax Credit and up to $2,000 through the Lifetime Learning Credit.
Claiming these education credits provides substantial dollar-for-dollar tax reductions that can significantly reduce or eliminate your tax liability while supporting international education. The American Opportunity Credit offers the highest benefit for undergraduate students in their first four years, while the Lifetime Learning Credit provides ongoing support for graduate school and continuing education with no year limits.
Key insight: Federal eligibility status matters more than school location.
How Do American Opportunity Credit & Lifetime Learning Credit Work for Foreign Schools?
Both education credits reduce your federal tax liability dollar-for-dollar, making them far more valuable than deductions that only reduce taxable income. Each credit serves different educational stages and needs.
American Opportunity Tax Credit for Students Abroad:
- Maximum $2,500 per eligible student annually
- 100% of the first $2,000 in qualified expenses plus 25% of the next $2,000
- Up to $1,000 is refundable (you can receive it even if you owe no taxes)
- Available for the first four years of undergraduate education only
- The student must be enrolled at least half-time
- Covers tuition, fees, and required course materials
Lifetime Learning Credit for International Education:
- Maximum $2,000 per tax return (covers entire family)
- 20% of the first $10,000 in qualified educational expenses
- Non-refundable credit that only reduces taxes owed
- No limit on the number of years you can claim it
- Available for undergraduate, graduate, and professional courses
- No minimum enrollment requirement
- Covers tuition and required fees only
Income limitations for both credits:
Both credits phase out at higher income levels. For 2024 and 2025, phase-outs begin at $80,000 for single filers and $160,000 for joint filers, completely eliminating credits at $90,000 and $180,000, respectively.
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Which Foreign Universities Qualify for These Education Credits?
Foreign schools must be eligible to participate in federal student aid programs administered by the U.S. Department of Education. This means the institution must have a Federal School Code and appear on the official list used for FAFSA applications.
How to verify school eligibility: Search the Federal Student Aid website at StudentAid.gov using their school search tool. Look for the school’s six-character federal code starting with “G” for foreign institutions. You can also contact the school’s financial aid office to confirm their federal eligibility status.
Examples of qualifying institutions: Many well-known international universities qualify, including institutions in Canada, the United Kingdom, Australia, Ireland, and other countries. However, qualification depends on federal eligibility status, not reputation or ranking.
What if your school doesn’t qualify? If your child attends a non-qualifying foreign institution, you cannot claim education credits for those expenses. However, you might still benefit from other education-related tax provisions or consider whether transferring to a qualifying institution makes financial sense.
What Expenses Count for Education Credits at Foreign Schools?
Qualified education expenses for foreign schools mirror those allowed for domestic institutions, with some important differences between the two credits.
American Opportunity Credit qualified expenses:
- Tuition required for enrollment or attendance
- Required fees directly related to academic instruction
- Required textbooks, supplies, and equipment for specific courses
- Required technology and software for coursework
Lifetime Learning Credit qualified expenses:
- Tuition required for enrollment or attendance
- Required fees directly related to academic instruction
- Does NOT include books, supplies, or equipment
Non-qualified expenses for both credits:
- Room and board costs (even if required by the school)
- Transportation and travel expenses
- Personal living expenses
- Health insurance premiums and medical expenses
- Non-academic fees like student activity charges
Currency conversion requirements: Convert all foreign expenses to U.S. dollars using exchange rates from the payment date. Use consistent rate sources throughout the year and document your methodology for potential IRS review.
Can You Claim Credits Without Form 1098-T from Foreign Schools?
Most foreign universities don’t issue Form 1098-T, but this doesn’t disqualify you from claiming credits. The IRS accepts alternative documentation when traditional forms aren’t available.
- Alternative documentation requirements: Maintain detailed records of tuition payments, including official receipts from the foreign institution, wire transfer confirmations, and enrollment verification letters. Keep course schedules and academic calendars showing enrollment dates and credit hours.
- Enrollment verification essentials: Document your student’s enrollment status through official transcripts, enrollment certificates, or letters from the registrar’s office. For American Opportunity Credit claims, clearly establish at least half-time enrollment status according to the school’s standards.
- Creating a documentation system: Organize records by tax year and include currency conversion calculations for each expense. Translate major documents to English if needed, maintaining both original and translated versions for potential audit protection.
The IRS requires the school’s Employer Identification Number (EIN) on Form 8863. If the foreign school doesn’t have a U.S. EIN, contact them about obtaining one or verify they’re truly eligible for federal aid programs.
Should You Choose American Opportunity Credit or Lifetime Learning Credit for Study Abroad?
You cannot claim both credits for the same student in the same tax year, but you can optimize your choice based on your international student’s situation.
When to choose the American Opportunity Credit for study abroad:
- The student is in their first four years of undergraduate education
- The student is enrolled at least half-time
- You want to include required textbooks and supplies in qualified expenses
- You could benefit from the partial refundability (up to $1,000)
- Higher maximum benefit potential ($2,500 vs $2,000)
When to choose the Lifetime Learning Credit for international education:
- The student is in graduate school or professional programs abroad
- The student has already used four years of the American Opportunity Credit
- The student is taking individual courses for professional development
- The student is enrolled less than half-time
- You have multiple family members with education expenses
Multiple student strategies: If you support multiple students abroad, you can claim the American Opportunity Credit for some and the Lifetime Learning Credit for others in the same tax year. This allows optimization based on each student’s education level and enrollment status.
How Do You File for Education Credits on Foreign University Expenses?
Claiming education credits for foreign university expenses requires completing Form 8863 and attaching it to your tax return.
Step-by-step filing process:
- Verify school eligibility using the Federal Student Aid website
- Gather documentation, including receipts, enrollment records, and currency conversion calculations
- Complete Form 8863 with student information and qualified expenses
- Choose your credit strategy between the American Opportunity Credit and the Lifetime Learning Credit
- Attach Form 8863 to your Form 1040 and file by the deadline
Required information for Form 8863:
- Student’s name and Social Security Number
- School’s name, address, and EIN (if available)
- Total qualified expenses paid during the tax year
- Currency conversion documentation for foreign payments
Expats receive an automatic extension to file by June 15, though any taxes owed must still be paid by April 15.
What If You’re an Expat Parent Supporting a Student Abroad?
Parents living abroad while supporting students at foreign universities can still claim education credits, though additional considerations apply.
U.S. citizen parents remain subject to worldwide income reporting requirements regardless of where they live, preserving their ability to claim education credit benefits. However, parents using the Foreign Earned Income Exclusion should ensure their Modified Adjusted Gross Income calculation includes any excluded foreign income when determining credit eligibility.
Some expat families find the foreign tax credit more beneficial than the foreign earned income exclusion when education credits are a significant factor. We have a rigorous hiring process for both our accountants and customer service representatives. Only an excellent CPA or Enrolled Agent will handle your return from start to finish, ensuring optimal strategy selection for your family’s situation.
Your Next Steps for Claiming Education Credits Abroad
Review your student’s school eligibility by searching the Federal Student Aid website and confirming they appear on the federal code list. Gather comprehensive documentation of qualified expenses throughout the academic year, including receipts, enrollment records, and currency conversion calculations.
Education credits provide substantial tax benefits that don’t disappear when your child studies abroad. With proper planning and documentation, your family can maintain these valuable benefits while supporting international educational opportunities that broaden your child’s horizons and career prospects.
Contact us, and one of our customer champions will gladly help. If you need specific advice on your tax situation, click below to get a consultation with one of our expat tax experts.
This article is for informational purposes only and should not be considered tax advice. Individual circumstances vary, and you should consult with a qualified tax professional for advice specific to your situation.
