If you live and work in Maine, you may be eligible for an education tax credit that helps alleviate the burden of your student loans.
The Educational Opportunity Tax Credit was once reserved only for those that went to school in Maine, but since the 2015 school year (class of 2016), you can attend college anywhere and still be eligible.
Who Qualifies for the Educational Opportunity Tax Credit?
The qualification guidelines are simple:
- If you live in Maine and obtain an associate’s or bachelor’s degree from a college in Maine (4-year or community) between 2007 and 2016, you qualify
- If you have an associate’s or bachelor’s degree obtained after 2015 from a college in Maine or outside of Maine, you may qualify
- If you have a graduate degree obtained after 2015 from a college in Maine, you may qualify
If you meet one of the above requirements and you live and work in Maine, you are eligible for the tax credit under the following stipulations:
- You may get credit for loan payments made during the time you lived and worked in Maine for that tax year.
- There is an exception for up to 3 months, though. If you work outside of Maine for three months in a tax year, you can treat it as if you worked the entire year in Maine, taking the full credit.
How Much is the Credit?
You can take a credit up to the benchmark loan payment amount for the year. If you have an associate’s or bachelor’s degree in STEM, the credit may be refundable. In this case, even if the credit exceeds your tax liability, you’ll receive a refund of the difference. If you aren’t eligible for a refundable credit, you can carry forward any unused portion for ten years.
How to Get The Educational Opportunity Tax Credit
Obtaining the tax credit is simple. Fill out the Educational Tax Credit Worksheet and include it with your tax return. The worksheet will show you the tax credit you are eligible for and that you can transfer to your 1040 to decrease your tax liability.
Since this is a tax credit, it directly reduces your tax liability each year. For example, if you owe $500 in taxes and you earn a $500 tax credit, you owe $0 for your taxes. It’s a dollar-for-dollar credit. Whether or not you get any overage depends on your degree. If you aren’t eligible for a refundable credit, you may only use the portion of the tax credit that equals your tax liability for the year.
The education tax credit is an excellent way to lower your tax liability while allowing you to get ahead on your student loans. Maine offers this incentive to encourage people to live and work in Maine regardless of where they obtained their associate’s or bachelor’s degree.