We are aware that student loan debt has become a growing concern among college graduates and wanted to remind you of a tax credit that you may be able to take advantage of.
The Maryland Higher Education Commission (MHEC) is continuing their Student Loan Debt Relief Tax Credit Program for 2022. This tax credit is given to help students offset some of their outstanding loan balances and has helped more than 40,000 Marylanders since the program first began in 2017. If you think you may qualify, you will want to move quickly as the window for submissions is closing as of September 15, 2022.
Here are the details
There are a few qualifications that must be met in order to be eligible for the 2022 tax credit. The student must:
- Have incurred at least $20,000 in undergraduate and/or graduate student loan debt;
- Have the debt be in their (the Taxpayer’s) name;
- Have at least $5,000 in outstanding student loan debt upon applying for the tax credit;
- Claim Maryland residency for the 2022 tax year; and
- File 2022 Maryland State Income Taxes.
If the student meets these qualifications they can submit an online application by September 15, 2022. The notification of tax awards are sent in mid-December. Along with the application the student must submit student loan information which includes Maryland Income Tax Forms, college transcripts, and lender documents.
MHEC has a method that they use to prioritize tax credit recipients and amounts based on qualified taxpayers who:
- Have higher debt burden to income ratios;
- Graduated from an institution of higher education located in Maryland;
- Did not receive a tax credit in a prior year; and
- Were eligible for in-state tuition.
Students who did not attend an in-state institution are still eligible for the tax credit, but may not receive as large a credit as those who attend an in-state (MD) school. You need not be a college graduate to qualify.
When the student is awarded with the tax credit, they must use the credit to pay their college loan debt within two years. They also must show proof of payment to MHEC. Failure to pay within the two years will result in recapture of credit back to the State. Recipients of the Student Loan Debt Relief Tax Credit have two options for debt repayment to lenders:
- Make a one-time payment for the amount of tax credit to lender; or
- Make monthly payments to the lender until the amount of the tax credit is paid.
This tax credit could be of great benefit to Maryland taxpayers with student loans. The application will close September 15, 2022.
As always, we stand ready to answer any questions that you have about this program or to assist you with submitting an application. Please contact our office anytime.