Maryland Offering Tax Credit for Student Loan Debt
June 11, 2018
It is no surprise that student loan debt is a growing concern among recent college graduates. As many students start their professional careers post-graduation, they will need to consider how to budget payments for their new college degree. To help ease this burden, the state of Maryland is continuing to offer a Student Loan Debt Relief Tax Credit for 2018.
In July 2017, The Maryland Student Loan Debt Relief Tax Credit went into effect by the Maryland Higher Education Commission (MHEC). The State has allocated up to $5 million a year towards helping students pay down their student loan burden. Qualified taxpayers may receive a tax credit up to $5,000, depending on the amount of approved applicants. For 2017 there were 5,000 applications and the average credit approved was $1,200 for in-state students and $1,000 for others.
If the MHEC approves over 1,000 applicants, they prioritize recipients and amounts on the following qualifications:
- Higher debt-burden-to-income ratios
- First time receiving the credit
- Graduated from a college in Maryland
- Eligible for in-state tuition at their college
Applicants do not need to fit into the above-mentioned groups. If approved, a tax credit will be provided, even though it may not be for the full amount.
Maryland has recently allowed this tax credit to be eligible for the 2018 tax year. The requirements are the same as last year:
- Filing Maryland State Income Taxes for the 2018 year
- Incurred at least $20,000 in total student loan debt
- Have at least $5,000 in outstanding student loan debt remaining during 2018 tax year
- Submitted an application to the MHEC by September 15, 2018
With the application, you must submit official college transcripts, student loan information, and prior year Maryland income tax return.
Upon receiving the tax credit, each recipient must use the credit to pay down their student loans within two years from the close of the taxable year for which the credit was claimed. Payments can either be a one-time payment of the full amount or routine monthly payments.
The total amount of the credit must be used within the two years or the credit will be recaptured. Proof of payment must be provided to the MHEC.
An additional item to note is that the credit is for students with debt in their name. Parents with student loan debt on the behalf of their children are not eligible for the credit.The State will be making the full credit information available online on July 2nd. For full details and to download the application visit: http://mhec.maryland.gov/preparing/Pages/StudentLoanDebtReliefTaxCredit.aspx
If you have any questions regarding the tax advantages associated with the Student Loan Debt Relief Tax Credit please Contact Us.