American Opportunity Credit for Canadian schools

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mackayr
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Joined: Wed Apr 14, 2010 9:37 pm

American Opportunity Credit for Canadian schools

Post by mackayr »

I'm reading that new for 2016, a claim for the American Opportunity Credit requires that the school issue the 1098-T slip for the student, unless they don't have to. The reasons cited for not being required to include, for example, situations where the tuition was paid in full by scholarships. In the case of Canadian schools, I trust they are also not required to issue a 1098-T slip.

What are your thoughts on claiming this credit for 2016 and future years? I've spoken to our local college (where my client attended), and was met with a "deer in the headlights" look. Given the 10 year ban on claiming the AOC if I get it wrong, I would like to be sure.

For the record, the college in question is on the list for US federal student loans, and has an ID number. Apparently they qualify for student loans, but only for certain programs. Interestingly my discussion with the US Federal Student Loan folks was to no avail. I was trying to ask them if eligible for certain programs only meant "eligible" using the wording in the IRS publication, but all they would say is "it's up to the school".

So ...

1) Does eligible mean eligible for any programs, or only the program you're participating in.

2) Is the 1098-T required for foreign schools (from US perspective)

Thoughts?
nelsona
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Post by nelsona »

You should ak the school,. They would be familiar with this for their US students, and can (and should) provide you with the required paperwork,
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mackayr
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Post by mackayr »

That would sure make it easy, but I've spoken to several reps at the school, and they have no idea. In fact, they asked me to let them know when I figure it out. It seems it's all hinged on the two points I indicated below (ie. Whether or not the school is eligible given that some programs are eligible for US loans, and whether or not the 1098-T is required for Canadian schools. I even came across a page on McGill website (much larger school) that indicated that they do not issue 1098-T slips).

Any other ideas?
nelsona
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Post by nelsona »

Since McGill is eligible, and they do not issue 1098-T slips, then you will just have to claim without it.
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mackayr
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Post by mackayr »

My client didn't attend McGill. She attended a local college (Holland College, Charlottetown, PE). I merely found that searching for references to 1098s with Canadian universities. That said, how do we know that McGill (or any school) is eligible?
nelsona
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Post by nelsona »

You misunderstood. Since McGill IS indeed a qualified school, and does not issue 1089-T, your school is not going to issue any either, whether they are qualified or not.
As to whether they are qualified, this is based on FAFSA, the US federal program for student aid. Foreign schools must be registered with FAFSA for any of this to work.


https://fafsa.ed.gov/FAFSA/app/schoolSe ... cale=en_EN

Put in "foreign country" and "Holland" and you will be pleasantly surprides.

Now, why your school offcials didn't know this is beyond me, since they would have put inb the application.

I'm afraid I've helped all that I can at this tiem.
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mackayr
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Post by mackayr »

I appreciate your help, nelsona. I did find them on that list previously, and they are there. However, according to the school, only certain programs are eligible. My client, unfortunately, didn't participate in one of those programs. Thus my question remains as to the eligibility of the school. If the SCHOOL is eligible for student loans (albeit only for certain programs) does that mean that the SCHOOL is "eligible" the purposes of the AOC, or only if the student participates in one of those loan-eligible programs. Obviously the IRS and the Dept of Education can have two separate sets of rules for being "eligible". It seems that the IRS relies on the Dept of Education to determine eligibility, but is silent with respect to situations where only certain programs may be eligible, speaking only of the institution level eligibility.

With respect to McGill not issuing the slips ... I've learned a lesson long ago that just because someone else (even bigger) does something, it doesn't mean it's right. (haha). Maybe McGill should be issuing those as well, or maybe they are issuing them this year given the new IRS requirements, and they just haven't updated their website. Perhaps I'll call McGill. Hopefully I won't be met with the proverbial deer in the headlights like I got at Holland College.

Thanks again!

p.s. I'll be sure to post my findings here if I find anything useful for other forum users.
mackayr
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Post by mackayr »

Just adding some more relevant information to this thread for the benefit of future readers.

In publication 970, the "What's New" section contains the following:

[quote]Form 1098-T requirement. For tax years beginning after June 29, 2015, generally tax year 2016 returns for most taxpayers, the law requires a taxpayer (or a dependent) to have received a Form 1098-T from an eligible educational institution in order to claim the tuition and fees deduction, American opportunity credit, or the lifetime learning credit. However, for tax year 2016, a taxpayer may claim one of these education benefits if the student does not receive a Form 1098-T because the student’s educational institution is not required to send a Form 1098-T to the student under existing rules (for example, if the student is a nonresident alien, has qualified education expenses paid entirely with scholarships, or has qualified education expenses paid under a formal billing arrangement). If a student’s educational institution is not required to provide a Form 1098-T to the student, a taxpayer may claim one of these education benefits without a Form 1098-T if the taxpayer otherwise qualifies, can demonstrate that the taxpayer (or a dependent) was enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses.[/quote]

Thus it appears that the only time for 2016 and onwards that you can claim the AOC without a 1098-T is if the school doesn't have to issue the 1098-T for reasons such as those indicated above (ie. non-resident alien, paid with scholarships or other formal billing arrangement). In the case of my particular client, none of these apply. That said, they are only "examples", so there may be other situations where a 1098-T slip is not required. Presumably schools outside of the US aren't required to issue it because they aren't in the US. That said, I understand that many US schools readily issue the Canadian TL11A form for Canadian residents. Perhaps our Canadian schools should be doing the same. It would make it a whole lot easier.

For the record, I have forwarded a reference to the 1098-T slip requirement to my local college for their consideration. Perhaps they'll look into it, issue the slip and problem solved.
nelsona
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Post by nelsona »

FAFSA dies not go into detail as to which programs are eligible for FAFSA or not. IF the Scholl is fafsa eligible it is AOTC-eligible as well. These are not new programs and credits, they have been around for at least a decade under various names, so the school have not had to change anything to conform.

Now, not all school expenses are eligible, and how a school that didn't know how to spell FAFSA would be smart enough to know the only certain programs are eligible (according to you), makes me wonder. But if they say that the program wasn't eligible, why are we going any further on this.

A bigger question is whether getting these credits will make a difference in their total taxes: Canada plus US.
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mackayr
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Post by mackayr »

In this case, the student gets a $711 refundable AOC credit, which translates to ... oh ... about $8,000 Canadian these days. So yeah ... it's worth it to the student.

I'm pursing further because the matter of "eligible" doesn't seem to take into consideration the programs. I agree with your statement on the blanket eligibility for FAFSA, but the fact that only some programs are eligible, and the prospect of a 10 year ban (student is only first year into the program), makes me want to be additionally vigilant to make sure. According to FAFSA, the school is the one to determine which programs are eligible (if any), but Holland College seems to refer to only some programs being "approved by the U.S. Department of Education...". Uncertainly remains.

In case anyone is curious, here's a link to the Holland College page where they specify that only certain programs are eligible. Seems like someone there has done their homework, but I'm doubtful that person is still with them since the current staff seem to be unclear.

http://www.hollandcollege.com/us-government-loans/
mackayr
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Post by mackayr »

p.s. McGill said they are aware of the new requirements, but they have decided to continue not issuing 1098-T slips. They're in a "wait and see" mode to see what happens.
nelsona
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Post by nelsona »

A 1098-T can be issued were NONE of the expenses are eligible. If this school were in US and the person had taken a program that was ineligible for FAFSA, then they would have issued a 1098-T with zero expenses, and would not be able to claim AOTC. you would just have clearer proof of ineligibility than for this school.



Seems like this is more likely the case with this student: they are paying "non-qualified tuition and expenses". The school as told you as much.
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mackayr
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Post by mackayr »

Good point. Perhaps I'll look further into why this program wasn't eligible for US student loans. It is a diploma granting program, as are every other program at the shool.

http://www.hollandcollege.com/programs/human-services/

The criteria for AOC is:
"Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential"

The above noted program certainly seems to fit the latter of "other recognized education credential", and certainly seems to have more academic merit than a "certificate", which also qualifies.
mackayr
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Post by mackayr »

Also, the student did receive a T2202A with $2,350 per semester tuition / full time enrollment. I don't think the criteria is that different here in Canada than the US. It's not like she's taking "Knitting 101" in night school for personal enjoyment. (haha)

In any event, I think my next call / action is to contact the school to find out why this program would not be included in the list of eligible programs for US loans other than that it wasn't a current program when the application was made to the FAFSA originally. Given the FAFSA response that the school is the one that determines program eligibility, perhaps the school just needs to have the board pass a motion to add this program to the eligible list of US student loans programs.
nelsona
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Post by nelsona »

"I don't think the criteria is that different here in Canada than the US." That's is funny.
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