I am on a H1 visa and my wife is going to the University on a H4 visa. I have a questions regarding deducting the tuition payments and would appreciate feedback from teh experts or others who have gone through the same situation.
Can I deduct my tuition expenses? If yes, is there a maximum per year I can deduct?
If my wife switches from being on a H4 (dependent) visa to a F1 (full-time student) visa does anything change (Can I still make the deductions from question1 if any)? She will not have any income when on F1 and we will be filing married/jointly.
If you meet the substantial presence test then you can file a regular
1040.
Substantial Presence Test
You are considered a U.S. resident if you meet the substantial presence test for 2007. You meet this test if you were physically present in the United States for at least:
days during 2007, and 2.
183 days during the period 2007, 2006, and 2005, counting all the days of physical presence in 2007, but only ? the number of days of presence in 2006 and only ? the number of days in 2005.
If you file a regular 1040, you can claim the hope credit, lifetime learning credit, or tuition and fees deduction. You can also deduct student loan interest.
The hope credit is only for the first 2 years of college, and is a maximum of $1650 per student -- 100% for first $1,100 and 50% of next $1,100. If your income is too high, the credit is phased out.
The lifetime learning credit is a maximum of $2000 per return -- 20% of the first $10,000 of expenses. It too gets phased out.
The tuition and fees deduction reduces your income, so it too reduces your tax. It too gets phased out at high income levels. However, it is available at higher income levels than the credits, so it is the only option for higher income taxpayers. The maximum deduction is $4,000 or $2,000 when your income passes a certain threshold. The tax savings on $4,000 may be 25% of $4,000 or $1,000 -- maybe more or less depending on your tax bracket, itemized deductions, etc.
See
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I don't think any of the states recognize these credits. And I think California I think has a partial deduction for student loan interest.
Your wife must also pass the substantial presence test to be treated as a resident alien for tax purposes. But see below.
Your question 2 was not answered. There is no advantage to change your wife's visa for tax purposes. In fact, it creates paperwork for you if you want to file a joint return as she would be exempt from the substantial presence test and would be a nonresident alien. This would necessitate you both making an election to treat her as a resident alien (assuming you are a resident alien) and attaching it to your tax return.
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