Who can claim the credit?

A New Way to Pay Down Your Student Debt

Companies and rural areas offer tax breaks and other benefits. By Kaitlin Pitsker

As the job market continues to tighten, cities, states and private employers are offering prospective employees a new perk: help in paying off their student loans.

Here in Maine, the state provides tax credits to student loan borrowers who live and work in the state if they graduated from any U.S. college in 2016 or later. Eligible residents can subtract their loan payments for the year from their state tax liability. Borrowers who studied science, technology, engineering or math will receive a check if they pay more toward their student loans than they owe in taxes. Other places that offer financial incentives to student loan borrowers include the state of Kansas and Niagara Falls, N.Y.

Private employers are helping with student debt, too. Employers that offer the benefit, including Aetna, Hulu and PricewaterhouseCoopers, typically offer a monthly or annual payout over several years. Last year, about 4% of companies offered repayment benefits, according to the Society of Human Resource Management. As more companies shy away from salary bumps in favor of bolstering benefits, more will likely begin to assist with student loans.

© 2019 The Kiplinger Washington Editors

Educational Opportunity Tax Credit FAQs

Source: Maine Revenue Services

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 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.

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 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.

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.