Albert E. Bergen, CPA

Maine’s Educational Opportunity Tax Credit

The Educational Opportunity Tax Credit (technically the Job Creation through Educational Opportunity Program) is a Maine state income tax credit that offsets the principle and interest  portions of student loan payments made by qualifying borrowers.  Depending on the student’s debt load, the credit may be worth up to $5,900 per year for up to 10 years.  The actual amount of the credit is based on the in-state tuition at Maine’s community colleges or the University of Maine System, but the students can attend any accredited schools in Maine.  Only loans awarded as part of the student’s financial aid package are eligible – outside loans, such as credit cards, home equity loans, or loans from family members do not qualify.

Who Qualifies

The credit is available to students who earn their associates or bachelor’s degrees in Maine and continue to live and work in the state.  Only loans used to pay for course work after January 2008 are eligible for the credit.  Prior to January 1, 2013, all  of the course work since 2008 had to have been completed at a Maine school.  The law was amended in 2011 to allow individuals to transfer to a Maine school after completing up-to 30 credit hours of work outside of Maine to claim half of the credit if they earned an associates degree or 3/4 of the credit if they earned a bachelor’s degree. 

If an employer makes student loan payments for an employee, the employer is then able to claim the tax credit instead.

How to Claim

The tax credit is claimed by the student or employer by attaching the appropriate worksheet when they file their Maine income tax return.   Keep in mind that not all tax software gets fully updated for every state tax credit, and taxpayers who prepare their own returns will need to be very careful to ensure that they don’t miss the credit or claim it inappropriately.

Policy Consideration

Not everyone agrees that the Educational Opportunity Tax Credit is good tax policy.

  • The tax credit isvery generous but helps very few people.  This means that students who started college in 2008 or later win.  Students who earned their degrees before then lose.  Undergraduate students win, and graduate students lose because the credit is only available for associates and bachelor’s degrees.  The credit is also not available to students who completed any part of their course work outside of Maine since 2008.
  • The tax credit is not well-publicized.  High school students selecting colleges may not be aware of it.  Students who qualify may not be claiming it, which keeps it from serving its purpose.  Some tax professionals may not be aware of it or remembering to ask the right questions to find out if their clients qualify for it.
  • There is a very long lead time between deciding to go to school in Maine and beginning to pay off student loans.  Incentives that have such a long delay are less effective than more immediate incentives, such as tax credits for tuition.
  • The 2011 changes to the law, which took effect in 2013, are not widely known.  As of October 22, 2013, the Opportunity Maine web site and many college web pages about the Educational Opportunity Tax Credit have not been updated for the changes.

Because the credit itself may be considered questionable tax policy, there is a good chance that the credit may some day be repealed.  Therefore, even students who meet the provisions of the credit may not be able to receive it for a full ten years.

 

More Information About Maine’s Educational Opportunity Tax Credit

Opportunity Maine Website – Note, this site appears to be out-of-date for some of the changes to the law.

Maine Revenue Service – Worksheet for Individuals (2012 version.  2013 is still pending)

Maine Revenue Service – Worksheet for Employers (2012 version, 2013 is still pending)

Maine Revised Statute  – Title 20-A, §12541: Definitions – Maine State Legislature

 

 

 

Leave a Comment