How to Get Tax Deductions for Care of Unrelated Students

Although you may be aware of the tax credits that are available to you as the parent of a dependent student, chances are you probably don’t know that you can receive a tax deduction even if the student isn’t related to you. The federal government has made it possible for you to deduct some of the expenses you incur. Here’s how to get tax deductions for care of unrelated students.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Receipts of expenses

1. Claim the deduction for care of an unrelated student only if the student is living with you in your home. Foreign exchange students and foster children living in your home are great examples of unrelated students that would qualify you for the tax deduction.

2. Know the limit. While it would be ideal for the government to allow you to claim all the expenses associated with caring for unrelated students, you can only deduct up to $50 each month for expenses. Although this isn’t a lot of money considering what you probably spend to care for the student, it does provide a savings of $600 per year on your taxes. These numbers are for the 2007 tax year; consult a tax advisor for any changes.

3. Save receipts of your expenses for each month to prove you spent at least $50 if claiming the full deduction in case you do get audited. Tax advisors and experts recommend you start a folder just as you would for other tax deductions (business or home), and keep your receipts there. This will make it extremely easy to prove to the IRS should they show up on your door step.

Tips & Warnings

• For more information about the tax deduction for unrelated students, consult your tax advisor.

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