Maryland Offering Tax Credit for Student Loan Debt
If you’re a current resident of Maryland and you have student loans, you may be eligible for up to $5,000 in the form of a state income tax credit to help you pay down your student loan debt.
In March, Gov. Larry Hogan introduced an initiative to allow Maryland residents to write off student loan interest payments. Now, we see another tax initiation came to fruition: the Student Loan Debt Relief Tax Credit went into effect July 1, 2017, and the first wave of applications are due in September. To qualify, you must
- be a current resident of Maryland (for the applicable tax year)
- have incurred at least $20,000 in total student loan debt
- have a remaining balance of at least $5,000
- submit an application by September 15
If you meet the qualifications, you can apply for the tax credit every year until you no longer qualify.
After you submit your application, the Maryland Higher Education Commission (MHEC) will notify you by December 15 if you have been approved. The Commission will also tell you at that time how big a tax credit you will receive.
MHEC expects you to use the tax credit to pay down your student loans within two years of receiving it. They expect you to provide proof that you have done so, and if you don’t, they will expect you to return the money.
Maryland has allocated $5 million for each year to be awarded as a tax credit. Depending on how many people qualify, applicants may not get the full $5,000. That means that if there are 1,000 or fewer approved applicants, everyone will get the maximum amount.
If there are more than 1,000 approved applicants, applicants who meet the following qualifications will get a higher credit:
- higher debt-burden-to-income ratios
- first time receiving this tax credit
- graduated from a college in Maryland
- eligible for in-state tuition at their college
Don’t worry too much if you don’t fit into those groups. If you are approved, you will get a tax credit, even though it may not be the full amount. However, any extra money to pay down student loan debt should be considered a win.
If you think you qualify for this tax credit, make sure to send in your application by September 15, 2017. You can find it on the MHEC website.
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