THE MAINE OPPORTUNITY TAX CREDIT
A Frequently Overlooked Tax Benefit
In General
One of the most generous and most overlooked Maine income tax credits is the so-called Credit for Educational Opportunity. In my experience few accountants and even fewer clients are aware of its existence. The credit is intended to reward college-educated people who live and work in Maine. In prior years you had to attend a Maine college to qualify. Now, the credit has been expanded to apply to any college graduate who lives and works in Maine.
I've noticed that most tax preparation software does not support the credit worksheet, which means that taxpayers or their accountants must calculate this credit manually.
Who Qualifies for the Credit?
Anyone who graduated with an associate or Bachelor degree in 2008 and later may qualify. For 2016 and later it doesn't matter if you attended a Maine college or not. If Maine is your state of residency and you also work in Maine then you will probably qualify. Self-employed individuals with a Maine business also qualify.
How Much is the Credit?
The credit amount is determined by the "benchmark student loan payments" made during the tax year. Maine Revenue Services has issued a table and a worksheet that translates this amount into the tax credit, which can range from hundreds to thousands of dollars. See:
There are Two Types of Credit: Refundable and Non-refundable
Refundable credits are the best type because, as the name suggests, Maine will issue you a refund check for the net amount. Non-refundable credits, alternatively, may be used to reduce your tax liability to zero, and that's it. Any excess of non-refundable credit over your tax liability may be carried forward to future tax years (a ten year carryover is allowed.)
If you graduated in 2016 with an associate degree your credit will be fully refundable.
If you graduated in 2016 with a bachelor degree in Science, Technology, Engineering or Math ("S.T.E.M." degrees) your credit is fully refundable. If you have a non-STEM degree then your credit is non-refundable and may be used to reduce or zero out your Maine taxes. If you have any excess unused non-refundable credit it may be carried forward.
Nursing is usually considered a STEM degree and qualifies for the more generous refundable credit.
What If You Forgot to Claim the Credit in Past Years?
If your prior year Maine returns did not claim the credit you may be able to file amended tax returns for open years and claim it. The clock is ticking when it comes to filing amended returns. Generally taxpayers have three years to file an amended return subject to various complexities beyond the scope of this article. Act soon so you don't miss out!
Where is the Credit Reported?
For a 2016 Maine return the credit is claimed on Schedule A, Line 4. You must attach documentation corroborating your student loan payments as well as college transcripts.
Special rules will reduce your credit if your employer made some or all of your student loan payments. In this case the employer may qualify for some or all of the credit.
For further information see:
http://www.liveandworkinmaine.com/opportunity-maine/
George Adams
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339
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