Take advantage of tax benefits for money you spend on education. Both the federal government and the state of Maine offer tax credits and deductions.
Student Loan Repayment Tax Credit
The Student Loan Repayment Tax Credit replaces the Educational Opportunity Tax Credit (EOTC) – often referred to as Opportunity Maine – for tax years beginning on or after January 1, 2022.
The SLRTC provides an annual refundable tax credit of up to $2,500 if you are an eligible Mainers who is repaying student loans and who lives and works in Maine. The revised program is available if you obtained an associate, bachelor’s, or graduate degree from any accredited community college, college, or university after December 31, 2007. The program has a lifetime credit cap of $25,000.
There will be a phase-out period from the prior EOTC program. If you have unused credit carryover amounts, they may be claimed and applied to the new credit, if you are a qualified individual. Additionally, the refundable STEM credit will be phased out. Maine Revenue Services will provide guidance for the phasing out of the refundable STEM credit provision and other details later this year.
If you are eligible and have not yet done so, you can still claim the EOTC for tax years beginning on or after January 1, 2008, and not later than December 31, 2021.
American Opportunity Tax Credit
This federal tax credit is up to $2,500 per student. It is available for the first four years of postsecondary education. To receive it, you must show you paid for qualified education expenses. There is a maximum income limit for this tax credit.
Lifetime Learning Credit
You may be able to claim up to $2,000 for qualified education expenses on your federal tax return with this credit. The number of years you can claim this credit is unlimited for eligible students.
A parent or student can only claim the American Opportunity Tax Credit OR the Lifetime Learning Credit for the same student.
Student Loan Interest Deduction
You may be able to deduct interest you paid on a qualified student loan, reducing your federal taxable income up to $2,500. This deduction has an income limit. This deduction may be taken even if the taxpayer does not itemize.
Tuition and Fees Deduction
You or your parents may be able to deduct qualified education expenses on your federal tax return. This may reduce taxable income up to $4,000.
Determining which credits and deductions you may qualify for can be challenging. Ask an expert if you need help.
For additional information on federal tax credits and deductions, visit the IRS.
This information is not intended as individual tax advice to any person and is provided as general information in connection with FAME’s mission to provide financial education to Maine citizens. Please seek professional advice based on your particular circumstances from an independent tax advisor.