Student Loan Repayment Tax Credit

Overview

If you live in Maine and make educational loan payments, you may be qualified for a refundable state tax credit known as the Student Loan Repayment Tax Credit (SLRTC). Replacing the Educational Opportunity Tax Credit (EOTC) in 2022, the SLRTC applies to more taxpayers than the previous version of the tax credit. At maximum, taxpayers can receive up to $2,500 per year, with a $25,000 lifetime limit.

Background

The credit was established in 2022 by the Job Creation through Educational Opportunity Program. This program has five main objectives per Maine Title 20-A, Part 5: Chapter 428-C:

• Promote economic opportunity for people in this State by ensuring access to the training and higher education that higher-paying jobs require
• Bring more and higher-paying jobs to this State by increasing the skill level of this State's workforce
• Offer educational opportunity and retraining to individuals impacted by job loss, workplace injury, disability, or other hardship
• Keep young people in this State through incentives for educational opportunity and creation of more high-paying jobs
• Accomplish all of the goals in this subsection with as little bureaucracy as possible

How do EOTC and SLRTC differ?

As mentioned above, the SLRTC replaced the previous EOTC in 2022, making the credit more broadly applicable. This means more taxpayers are now eligible to receive it than before. The new credit differs in two key ways: college location requirements and refundability. Unlike before, taxpayers do not have to have graduated from a Maine university, rather, they only need to have obtained a degree from any accredited community college, college, or university. Further, the SLRTC is now refundable for all taxpayers, not just those who have obtained science, technology, engineering, or mathematics (STEM) degrees. The lifetime limit is now $25,000 per taxpayer, whereas there was no lifetime cap before.

Are you qualified?

Qualified individuals are those who:

• Have obtained an associate’s, bachelor’s, or graduate degree after 2007 from an accredited Maine or non-Maine community college, college, or university
• Have a certain level of earned income
• The taxpayer must have earned at least the Maine state minimum wage determined on January 1 of the taxable  year. For tax year 2025, this amount is $13,712
• Are a Maine resident on the last day of the tax year
• File a Maine income tax return
• Make eligible educational loan payments directly to the lender during the tax year
• Non-eligible loan payments include:

• loans obtained from a person related to the qualified individual
• loans obtained from any qualified employer plan
• any loan made under a contract purchased under a qualified employer plan

Do you have a parent PLUS loan? These loan payments do not qualify for the credit; but, we may be able to help! 

How much are you eligible for?

The credit is equal to the eligible educational loan payments paid directly to the lender by the qualified individual during the tax year in question. Unused amounts carried forward from the EOTC in previous years may also apply. Overall, there is a $2,500 annual limit and a $25,000 lifetime limit.

For tax year 2022 or 2023, there is a one-time election that can be made for up to a $3,500 credit instead of the annual $2,500 limit. To qualify, the individual must have received the EOTC for any of the tax years 2019, 2020, or 2021. The individual must have also received an associate’s or bachelor’s degree in science, technology, engineering, or mathematics (STEM). The one-time increase of $1,000 does not count against the SLRTC $25,000 lifetime limit.

For more information, reach out to the team at Silver Accounting Service or visit the Maine Department of Administrative and Financial Services website.