Educational Opportunity Tax Credit FAQ

Additional FAQs about the Educational Opportunity Tax Credit can be found under the Coronavirus (COVID-19) FAQs.

Individuals

  1. Who can claim the credit?
  2. I was not employed in Maine during the entire tax year. Can I claim the credit?
  3. I am self-employed. Do I qualify for the credit?
  4. I earned my degree in Maine but some of my credits were earned at a non-Maine college, community college or university. Do I qualify for the credit?
  5. How much is the educational opportunity tax credit?
  6. How much is the monthly benchmark loan payment amount?
  7. How do I know if my degree is a STEM degree?
  8. I am a qualifying graduate. Can I claim a credit for loan amounts paid by others on my behalf?
  9. I have made loan payments on behalf of another person who is a qualifying graduate. Can I claim the educational opportunity tax credit?
  10. Can I claim the educational opportunity credit for loan amounts that I paid even though my employer reimbursed me for the payments?
  11. My employer made education loan payments on my behalf. Can I claim the Maine deduction (Form 1040ME, Schedule 1) for education loan payments paid by my employer?
  12. If I claimed the federal deduction for student loan interest, can I also claim the Maine deduction for education loan payments made by my employer on Form 1040ME, Schedule 1?
  13. I received a double-major in 2018: a bachelor's degree in psychology and a bachelor's degree in child and family development. Can I claim a credit for each degree?
  14. I received an associate degree prior to 2008 and am now taking classes to earn a bachelor's degree. Can I include my loan payments for courses I completed before 2008 that apply to my bachelor's degree when claiming the credit?
  15. I received a bachelor's degree and a graduate degree at the same time. Can I claim the credit?
  16. It is my first year claiming the EOTC. Do I need to provide additional information with my tax return?
  17. During the tax year, my education loans were in deferment or forbearance. However, I have continued to pay my student loans during this time. Can I still claim the EOTC for these payments?

Employers

  1. I am an employer. Do I qualify for the educational opportunity tax credit?

Individuals

1. Who can claim the credit?

The credit for educational opportunity is available to Maine residents who obtain an associate or bachelor’s degree from a Maine college, community college or university after 2007 ; or an associate or bachelor’s degree after 2015 from an accredited Maine or non-Maine college, community college or university; or, a graduate degree after 2015 from an accredited Maine college or university and who, after graduation, live, work and pay taxes in Maine. The credit is also available to employers of qualified graduates.

Revised: February 3, 2021

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2. I was not employed in Maine during the entire tax year. Can I claim the credit?

Only eligible education loan payments made during the part of the tax year during which the individual was a resident of Maine working in Maine or was deployed for military service in the United States Armed Forces or was employed at least part-time (16-32 hours per week) on a vessel at sea qualify for the credit. Except that for tax years beginning on or after January 1, 2015, an individual working outside Maine for up to 3 months during the Maine residency period will be considered to have worked in Maine during those months.

An employee who worked in Maine for any part of a month is considered to have worked in Maine for that entire month.

Revised: February 3, 2021

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3. I am self-employed. Do I qualify for the credit?

For tax years beginning on or after January 1, 2015, the credit is extended to otherwise qualified individuals who are self-employed in Maine. The self-employed person may also qualify for the credit for employers if the self-employed person has employees.

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4. I earned my degree in Maine but some of my credits were earned at a non-Maine college, community college or university. Do I qualify for the credit?

For tax years beginning on or after January 1, 2008 but before January 1, 2012, 100% of coursework toward the degree earned after 2007 must have been performed at a Maine community college, college or university.

For tax years beginning on or after January 1, 2013 but before January 1, 2016, eligible education loan payments may include payments made for loans associated with earning up to 30 credit hours after 2007 for the degree at an accredited non-Maine college, community college or university by a qualifying graduate who transferred to an accredited Maine college, community college or university after December 31, 2012.

For tax years beginning on or after January 1, 2016, there is no limit on the number of credit hours earned at a non-Maine college, community college or university.

Revised: February 3, 2021

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5. How much is the educational opportunity tax credit?

The educational opportunity tax credit is equal to the lesser of annual loan payments or the amount due, up to the benchmark loan payment amount, made by the taxpayer on eligible loans included in the qualified graduate’s financial aid package. Certain limitations apply.

The credit is limited to tax except that for tax years beginning on or after January 1, 2013, the credit is refundable if the graduate has obtained an associate or a bachelor’s degree that qualifies as a degree in science, technology, engineering or mathematics (STEM degree) under MRS Rule 812. For tax years beginning on or after January 1, 2016, the credit is refundable for all associate degrees. Unused portions of the nonrefundable credit may be carried forward for up to 10 years.

The Employer credit is not refundable regardless of the type of degree earned.

Revised: February 3, 2021

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6. How much is the monthly benchmark loan payment amount?

The benchmark loan payment is

If you graduated in: Associate degree Bachelor's degree Graduate's degree
2008 * * N/A
2009 * * N/A
2010 $72.00 $343.00 N/A
2011 $68.00 $344.00 N/A
2012 $65.00 $342.00 N/A
2013 $65.00 $356.00 N/A
2014 $66.00 $363.00 N/A
2015 $70.00 $377.00 N/A
2016 $70.00 $373.00 $325.00
2017 $68.00 $364.00 $317.00
2018 $74.00 $377.00 $328.00
2019 $77.00 $367.00 $338.00
2020 $77.00 $367.00 $341.00

* If you graduated in 2008 or 2009, the benchmark loan payment is the amount stated in the Opportunity Maine Contract you signed with your college or university. If you do not have a copy of the contract, your school's financial aid office may provide you with the benchmark loan payment for the year in which you graduated.

Revised: February 3, 2021

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7. How do I know if my degree is a STEM degree?

See Rule 812, Credit for Educational Opportunity. Your degree is determined to be a STEM degree if it is listed as such in the rule or is included on the United States Department of Homeland Security, Immigrations and Customs Enforcement STEM-designated Degree Program list.

Revised: February 3, 2021

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8. I am a qualifying graduate. Can I claim a credit for loan amounts paid by others on my behalf?

You may only include eligible loan payments you made directly to the lender. You cannot claim payments that were made to your lender by another individual, even if you advance or reimburse that individual for the payments. Also, loans must be in the name of the qualifying graduate to be considered eligible loans.

Revised: February 3, 2021

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9. I have made loan payments on behalf of another person who is a qualifying graduate. Can I claim the educational opportunity tax credit?

No individual may claim a credit for loan payments made on behalf of another qualifying graduate except that an employer of a qualifying graduate may claim a credit based on loan amounts paid directly to the lender on behalf of the qualifying graduate.

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10. Can I claim the educational opportunity credit for loan amounts that I paid even though my employer reimbursed me for the payments?

You can claim the credit based on loan payments you paid directly to the lender. Note that your employer will most likely include the amounts reimbursed to you in your taxable income in box 1 of your Form W-2.

You cannot claim a credit based on any amount that your employer paid directly to the lender on your behalf.

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11. My employer made education loan payments on my behalf. Can I claim the Maine deduction (Form 1040ME, Schedule 1) for education loan payments paid by my employer?

You may claim the Maine deduction on Form 1040ME, Schedule 1 for loan payments your employer made directly to the lender(s) to the extent the amount paid on your behalf is included in your federal adjusted gross income. It does not matter whether the employer claims, or could claim, the credit. However, you cannot claim the educational opportunity tax credit on Form 1040ME, Schedule A based on any amount that your employer paid directly to the lender on your behalf.

If your employer made the payments directly to you, you cannot claim the Maine deduction on Form 1040ME, Schedule 1 even for amounts that are included in your federal adjusted gross income. However, you can claim the educational opportunity tax credit on Form 1040ME, Schedule A based on the loan payments you made directly to the lender.

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12. If I claimed the federal deduction for student loan interest, can I also claim the Maine deduction for education loan payments made by my employer on Form 1040ME, Schedule 1?

Yes. However, you can only include in the Maine deduction amounts that are included in federal adjusted gross income. Therefore, if you deducted student loan interest on your federal return, that amount is not included in federal adjusted gross income and may not be included in the amount of employer payments deducted on your Maine return.

For example, your employer made student loan payments to your lender equal to $2,400 of which $1,600 was applied to principal and $800 was applied to interest. Your employer reported the $2,400 as additional compensation in box 1 of your Form W-2. You deducted $800 of student loan interest on your federal income tax return. Since this amount is not included in your federal adjusted gross income, you can only include $1,600 ($2,400 - $800) in the subtraction on your Maine return.

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13. I received a double-major in 2018; a bachelor’s degree in psychology and a bachelor’s degree in child and family development. Can I claim a credit for each degree?

Yes, except that if each degree was earned based on the same courses and the same student loans, you may claim only one credit based on the student loans.

Revised: February 3, 2021

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14. I received an associate degree prior to 2008 and am now taking classes to earn a bachelor’s degree. Can I include my loan payments for courses I completed before 2008 that apply to my bachelor’s degree when claiming the credit?

You can only include the loan payments you paid for a degree you have received after 2007. You can include the loan payments made for your bachelor’s courses after obtaining your bachelor’s degree.

Revised: February 3, 2021

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15. I received a bachelor’s degree and a graduate degree at the same time. Can I claim the credit?

For tax years beginning before January 1, 2016, if you were enrolled in a program that awarded you a bachelor’s degree and a graduate degree from a Maine school at the same time, you can claim the credit based on that portion of your loan payments that is attributable to the credit hours required for the bachelor’s degree. You must provide documentation supporting your claim. Maine Revenue Services will review the information you include with your return. You will be notified of any changes made to your return.

For tax years beginning on or after January 1, 2016, you may include the full loan payments, subject to limitation, for both degrees earned at the same time. However, if you are claiming a separate credit for each degree earned, you may only include loan payment amounts that are based on loans attributable to the degree earned. That is, your loan payment amounts may not be included in the calculation of multiple credits.

Revised: February 3, 2021

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16. It is my first year claiming the EOTC. Do I need to provide additional information with my tax return?

If this is the first year you are claiming the EOTC, you must include supporting documentation with your tax return and the EOTC worksheet. Supporting documentation includes: transcripts from all schools attended which show the name of the degree earned, when the degree was conferred and when the credit hours were earned (if the transcripts only show when the credit hours were earned, a diploma must also be provided), as well as loan documentation showing the monthly loan payment amount due and a payment history showing each monthly payment made during that tax year.

Revised: February 3, 2021

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17. During the tax year, my education loans were in deferment or forbearance. However, I have continued to pay my student loans during this time. Can I still claim the EOTC for these payments?

For tax years beginning on or after January 1, 2020, student loan payments made by qualified individuals on loans suspended due to deferment or forbearance will qualify for the EOTC, even though no amount is due on the loan(s) during that period.

IMPORTANT NOTE: Your required loan amount due will be the amount that would be otherwise due but for deferment or forbearance. If the amount cannot otherwise be determined, the amount considered due will be equal to the benchmark loan payment.

For tax years beginning before January 1, 2020, if your loan is deferred or in forbearance and there is no loan payment due, any payments you make while the loan is deferred or in forbearance are not eligible for the EOTC.

For more information, see MRS Rule 812.

Revised: April 9, 2021

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Employers

18. I am an employer. Do I qualify for the educational opportunity tax credit?

You may claim the educational opportunity tax credit based on payments you made directly to the lending institution on behalf of a qualifying graduate in your employ. The employer credit is not refundable.

You may not claim a credit for payments or reimbursements made directly to the employee.

Note that you can claim the employer credit even if the otherwise qualified graduate earned a degree at a non-Maine college, community college or university after 2007.

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Last updated: March 2019