Here's the response I got from the IRS (they copied & pasted my questions):
Your Question Was:
1) I am a North American Language and Culture Assistant in Spain and earn a monthly stipend of 1000€ per month. I don't know if this is taxable income, as it is a grant through Spain s Ministerio de Educación.
2) I am a full-time grad student at the Universidad Complutense de Madrid and I paid my tuition out of pocket in 2010. Is this deductible?
The Answer To Your Question Is:
Thank you for your inquiry regarding whether your stipend is taxable income and
whether your tuition expense is deductible. I apologize for the delay in responding to your question. My response assumes that your inquiry is regarding the current tax year 2010 and that you are either a U.S. Citizen or Resident Alien.
A stipend is defined as a fixed sum of money paid periodically for services or to defray expenses. The fact that remuneration is termed a “fee” or “stipend” rather than salary or wages is immaterial. Grants given to students, trainees, or researchers which require the performance of personal services as a necessary condition for disbursing the grant do not qualify as scholarship or fellowship grants. Instead, they are compensation for personal services considered to be wages. It does not matter what term is used to describe the grant (for example, stipend, scholarship, fellowship, etc.). You must report the amount of your stipend earned as taxable income on your U.S. Income Tax Return.
You may be able to deduct qualified education expenses paid during the year. For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.
An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs. The educational institution should be able to tell you if it is an eligible educational institution.
Generally, you can claim the tuition and fees deduction if all three of the following requirements are met: you pay qualified education expenses of higher education,
you pay the education expenses for an eligible student and the eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.
You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education. You are not eligible to claim the Tuition and Fees deduction if your Modified Adjusted Gross Income is $80,000.00 or more ($160,000 if filing a joint return).
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000 for tax year 2010. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A, (Form 1040) Itemized Deductions. This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high.
You may be able to take the Lifetime Learning Credit for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax. Please refer to Publication 970, Tax Benefits for Education, for more information on the Lifetime Learning Credit and the Tuition and Fees Deduction.
The information provided is from the Publication 17, Your Federal Income Tax and the Publication 970, Tax Benefits for Education. Forms and Publications are available on our website @
www.irs.gov.
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