Are Study Abroad Programs Tax Deductible?

Posted by Up with People on May 10, 2019

Thinking about traveling for a semester in a study abroad program?

Travel is experiential education in its purest form. It broadens the mind, and exposes us to learning opportunities that we couldn’t encounter at home. Up with People’s study abroad students recognize the significance of this, and take advantage of two added bonuses.

  1. Earning college credit for their travel
  2. Taking advantage of the fact that a large portion of their program fee may be tax deductible!

What is the study abroad program in Up with People?

Study abroad group in Up with People with their professors
Study abroad group with their professors during the Spring, 2019 tour of Up with People

Thanks to our partnership with Florida Southern College, currently in its seventh year, students who enroll in the Up with People Study Abroad program receive 12 academic credits from upper-level university classes. Three courses are offered each tour. We offer two Communications and one Business course, with different offerings in the fall and spring semesters. The two professors visit the cast three times throughout the tour and weekly assignments are submitted online.

Pete Anderson has been one of our study abroad professors since the program began in 2012. He teaches Contemporary Leadership Models and Principles of Management and is also an Up with People alumnus. Pete traveled as a participant and then road staff throughout much of the 1990s.  

“Management is necessary to accomplish anything requiring more than two people,” said Pete. “Teaching my course, my goal is for the students to see management everywhere, to be able to analyze it, understand it, and apply it.”

Why should my child participate in the study abroad program?

Our study abroad students choose this program for many reasons. Most students want the chance to earn university credit while traveling. This way they can consider their Up with People program fee part of the cost of their higher education. These credits are transferable to the institution of their choice.

We also have international cast members who take the courses for the opportunity to study and converse in English with the rigor of academic conversations. Some students take it because the courses sound interesting and they want the chance to dive into their Up with People experience.

Bela Walto is a second semester Up with People study abroad student. Originally, Bela participated in Camp Up with People which sparked her desire in touring with  Up with People after high school.

“I am so glad I chose to participate in the study abroad program during my time in Up with People,” Bela told Up with People. “It brings a completely different perspective to your entire experience in the program as we look at different leadership practices, ways of communicating and how and why teams work. We get to study these topics while being a part of a program that puts all of them to work. Connecting what I was learning in theory to real life was wonderful and helped me understand the topics even more.”

Is the study abroad program tax deductible?

Another huge benefit for students from the United States who choose this program is that a portion of their Up with People program fee is tax deductible as tuition paid on the 1098-T tax form.

For tax purposes, our program fee for study abroad students is divided as tuition and room and board. The tuition portion of the program is tax deductible, less any financial aid that is awarded.

For a first semester student, that claimable amount in 2019 is $10,250, less any Up with People scholarships received. This tax deduction is only applicable to those students participating in the study abroad program, as the form is provided by the educational institution of record, Florida Southern College.

“While the initial decision for Lalibela to participate in the study abroad program wasn’t impacted by the tax status,” said Dennis Walto, Bela’s father, “I was delighted to learn that a portion of the tuition was tax deductible! This fact made opting in for a second semester all the easier. The staff of Up with People was very helpful in making sure that the college provided the necessary 1098-T form that I am to include in my tax return. In many ways, Up with People is a learning laboratory, and it’s great to know that Lalibela’s experience is being enhanced by both formal and non-formal education opportunities. It’s a Win-Win!”

Study abroad tax deductions infographic

What’s the difference between a 1098-T and Section 529?

When it comes down to the nitty gritty of figuring out how to pay for your child’s education through the Up with People study abroad program, things can begin to seem a little overwhelming. Parents have two opportunities to help save on the cost of their program. We always strongly recommend speaking with your tax preparer so he or she can provide professional advice.

Let’s break down the difference between the two.

Section 529 Education Savings

Exactly as the name describes, Section 529 is a long-term savings plan that parents can start for their children when they are young. Just like any other savings plan, it is a college fund that accrues interest as time goes on and you continue to invest. The great part of a 529 is that when the money is withdrawn from the account, it is completely tax-free. However, it is only tax-free when used for educational opportunities. This includes the tuition portion of the Up with People study abroad program.

Form 1098-T

Tuition and certain fees are eligible for United States residents as expenses to claim on your taxes. Regardless if you have a 529 savings plan set up or not, it’s important to ask your tax advisor if you are eligible to claim the tuition portion of your child’s study abroad program on your taxes. This form is called 1098-T.

Other expenses such as room and board, transportation and other personal costs are not considered qualified. These will not be reflected on your 1098-T. If you receive an Up with People scholarship, or other means of financial aid, your claimable tuition is reduced by that amount.

For example:

  • A student receives an Up with People scholarship of $1,500
  • Your tuition ($10,250) – Scholarship ($1,500) = $8,750 (Amount of Education Spending)

In this example, the educational spending cost of $8,750 is the amount that will be listed on the 1098-T form provided by Florida Southern College as your tuition paid. It is also the amount that can be applied tax-free from a 529 savings plan.

Can I use both a 529 Savings Plan and the 1098-T?

The answer is yes and no.

If you do not already have a 529 savings account set up for your child, you can use the 1098-T as a stand-alone form. This will allow you to show the tuition payment is education spending and it lowers your overall taxable income.

If you do use a 529 savings plan to help pay for the tuition, you will show the tuition payment is non-taxed by filing the 1098-T. While one does not replace the other, a 1098-T is needed whether you have a 529 savings account or not.

Again, we strongly encourage you to speak with a tax professional to help sort out your finances appropriately when planning your child’s education payment plans.

Study abroad student with professor
Pete Anderson, an Up with People study abroad professor, with former student and cast member, Misa from the U.S.

How does the study abroad program work?

Cast members who are involved in the study abroad program take their courses while traveling on tour. One day per week, students will have five to six hours together to have group discussions, virtual classes with their professors and study time. This time is provided so  they don’t have to take time away from their host families. Assignments directly relate to the activities and learning they are doing throughout the rest of the Up with People experience. Their professors visit them on the road three times for in-person coursework; at the beginning, the middle and the end of the semester.

“When Lalibela first looked at spending a ‘gap year’ with Up with People,” shared Dennis, “she was prepared to delay her college entrance and start fresh a year later. That completely changed when she learned about their study abroad opportunity. Participating in the study abroad program has enabled Lalibela to not only earn college credits while she does what she loves, but it also provided her with a close circle of fellow students doing the same thing.”

If you are interested in learning more about the Up with People study abroad program, please visit https://upwithpeople.org/travel/earn-academic-credit/ or email us at info@upwithpeople.org.

 

**Disclaimer: Up with People or their affiliated staff members and representatives are not tax professionals. This advice is not intended or written to be used as professional advice. If you are seeking legal, tax, accounting, or other professional advice, please seek a professional advisor in their related field.**

 

“No more hate no more violence
We have strength together
And we won’t be silent
We are one love, together we’re strong
We are one love, together we are strong.”

Stronger Together © Up with People

 

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Topics: Study Abroad

Up with People is a global education organization which aims to bring the world together through service and music. The unique combination of international travel, service learning, leadership development and performing arts offers young adults an unparalleled study abroad experience and a pathway to make a difference in the world, one community at a time. Click here to learn more about the internationally acclaimed program, Up with People.

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