Educational Opportunity Tax Credit FAQs
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 but before 2016; or an associate or bachelor’s degree after 2015 from an accredited Maine or non-Maine 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.
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 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.
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.
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, 2012 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 or university by a qualifying graduate who transferred to an accredited Maine 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 or university.
The credit for educational opportunity is equal to payments, 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 in science, technology, engineering or mathematics (STEM degree). 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 even if the graduate has obtained an associate or STEM degree.
The benchmark loan payment is If you graduated in: Associate degree Bachelor's degree Graduate's degree
* * N/A
* * N/A
$72.00 $343.00 N/A
$68.00 $344.00 N/A
$65.00 $342.00 N/A
$65.00 $356.00 N/A
$66.00 $363.00 N/A
$70.00 $377.00 N/A
$70.00 $373.00 $325.00
$68.00 $364.00 $317.00
* 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. Include a copy of that contract with this worksheet. If you do not have a copy of the contract, include a copy of a statement from your school�s financial aid office stating the benchmark loan payment for the year in which you graduated.
See Rule 812, Credit for Educational Opportunity available at www.maine.gov/revenue/rules.� Your degree will be considered to be a STEM degree if it is listed in section .02 of Rule 812 or is included on the United States Department of Homeland Security, Immigrations and Customs Enforcement STEM-designated Degree Program list.
Also, see the list of STEM degrees for purposes of claiming the refundable educational opportunity tax credit, available on the Maine Revenue Services website for a sample of STEM degrees.
If your degree is not included in any of the resources listed above, and you believe your degree is a STEM qualified degree, file Form 1040ME, related schedules, worksheets and other information supporting the credit as a qualified, refundable STEM degree. Supporting information should include the Classification of Instructional Program (CIP) code as assigned by your school and a letter from your Dean, or other school official, describing why your degree program should be classified as STEM. MRS will review the information you include with your return. You will be notified of any changes made to your return.
You may only include eligible loan payments you made directly to the lender.
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.
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.
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.
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.
13. I received a double-major in 2017; a bachelor’s degree in psychology and a bachelor’s degree in child and family development. Can I claim a credit for each degree?
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.
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 have taken 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 for your bachelor’s courses after you have earned your bachelor’s degree.
For tax years beginning before January 1, 2016, if you were enrolled in a program that awarded you a bachelor’s degree and a master’s degree 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.
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.