opportunity tax credit sample worksheet

How To Get Hundreds Back From The State Just For Paying Your Student Loans: The Educational Opportunity Tax Credit

In Debt, Money, Personal Finance, Student Loans by KatelynLeave a Comment

Do you want to see if you can get hundreds or possibly thousands back each year just for paying your student loans?

Did you graduate from a Maine college or University after January 1, 2008?

Do you work in Maine?

Do you pay your student loans?

If you answered yes to all of the above then….

Did you know the State of Maine offers a tax credit called the Educational Opportunity Maine Tax Credit (EOTC) for qualifying graduates? Yeah, neither did I until recently! Unfortunately the State seems to keep this tax credit under-raps. I’m not sure if Maine colleges are supposed to tell students about this because I know UMF didn’t tell me about it! Either way, here is what you need to know to claim this credit on your State Tax Forms to possibly get hundreds or possibly thousands of dollars back!

The Educational Opportunity Tax Credit is a component of the Job Creation through Educational Opportunity program that began in 2008. The tax credit reimburses Maine workers for student loan payments for those who earned either an associate or bachelor’s degree at any Maine college or university and continues to live and work in the state after graduation. This credit can be claimed individually or by a business that pay employees’ student loans as an employee benefit. As a side note, where can I find a job that pays my student loans?

Not everyone qualifies for this tax credit, which is why I didn’t think I did when I found out about the tax credit. My friend who works for the Maine Revenue Service was the one that told me I qualified and helped me fill out the paperwork so I could amend four years of tax returns to get $1160 back from the State. Filling out all the paperwork was a big pain in the butt, but to get that check back in my bank account was amazing! I was able to pay off one of my SallieMae loans with it!

Eligibility:

  1. You must have graduated after January 1, 2008
  2. Only credits after January 1, 2008 count towards the credit
  3. You must have graduated from a Maine college or university with either an associates or bachelor’s degree
  4. You do not have to be a permanent Maine resident during college as long as you lived in Maine during the school year and live and work in Maine after graduation
  5. If you leave Maine after graduation and then come back to Maine to live and work you can start to claim the tax credit
  6. Only undergraduate loans count
  7. You must make eligible education loan payments throughout the tax year for the months that you lived and worked in Maine (deployed military members are exceptions)
  8. Up to 30 credit hours from an accredited non-Maine college or university may be earned prior to transferring and graduating from a Maine school (NEW in 2013)
  9. The credit is fully refundable if your degree is an approved degree in science, technology, engineering or mathematics (NEW in 2013; see www.maine.gov/revenue/forms for list of approved STEM degrees)

Filling out the paperwork can be quite stressful. More so if you’re amending your tax forms because you have to fill out several different forms.

Steps to Filling Out the Educational Opportunity Tax Credit Worksheet:
A sample form

A sample form

Note: This is for the 2013 form. The 2014 form may change.

  1. Download worksheets from the Maine Revenue Service website.
  2. Fill in your name, social security number, college or university name, name of degree, and graduation date.
  3. Check Line C if you obtained a STEM degree.
  4. Enter the “monthly benchmark loan payment.” This information is located on the instructions page. If you graduated in 2008 or 2009 then you must call your school to get this number.
  5. Enter the “monthly eligible education loan payment due.” This means what is the monthly statement balance that you pay each month from your loan lender. For the case of John Smith, SallieMae sends him a monthly bill of $150.
  6. Enter the “monthly eligible education loan payment you paid.” For most people this should be the same as “monthly eligible loan payment due.” However, it could be different if you pay less or more than the amount due.
  7. Line 4 asks for the smallest of the lines 1, 2, 3. Enter the smallest amount. In John Smith’s case his smallest amount is 150. Again, if John only paid $100 a month instead of the $150 he is supposed to pay, then he would record 100 on Line 4. If John Smith paid $300 a month, only $150 would count towards his credit.
  8. Line 5 asks for the number of months during the tax year that you are a Maine resident. The subsequent lines ask about the number of months you worked in Maine and made student loan payments. These might all be the same or different.
  9. Multiple line 4 (i.e., your monthly loan payment) by line 5c (i.e., the number of months you lived, worked and made student loan payments in Maine).
  10. Enter the number of credit hours you earned toward your degree after December 31, 2007. Since John Smith graduated in 2012 all his credits were earned after 2007. For me, only 28 credits were earned after 2007.
  11. Enter the total number of credit hours you earned toward your degree. This information is located on your transcript. For John Smith his total was 130 credits. For me, my total credits for my Biology degree was 127 credits.
  12. Divide line 7 by line 8. For all college graduate 2012 and forward this number will be one. For me, my number was 0.2205 or roughly only 22% of my credits counted towards the tax credit because I graduated in December 2008.
  13. Multiply line 6 by line 9. For John Smith his number is $1800. For someone like myself, the number will be smaller.
  14. If you first attended an out-of-state school and then transferred back to Maine then this is where you would reference the difference. John Smith spent his first year at UNH before transferring to UMaine thus he can only claim 0.75 of the $1800. However, if your transfer credits happened before January 1, 2008 then you do not need to claim this since any credits before January 1, 2008 do not count towards this credit.
  15. If you have a STEM degree then this amount is fully refundable. John Smith is getting $1350 back with his State Tax Return! Yipee! And because John Smith is super smart he will apply this to his student loan payments to get out of debt faster! If you do not have a STEM degree, then you will probably only get a portion of the refund back depending how much you “overpaid” in state taxes.
Documentation

In order to receive the tax credit you must provide documentation to the state to prove that you are really paying your student loan payments. This is a huge pain in the butt, but if you do it right the first time then you don’t have to deal with calling the state and fixing things. Here is what you need to include with your tax forms to support the tax credit:

  1. A copy of your diploma
  2. A copy of all your transcripts (from every college you attended)
  3. Proof of monthly loan payments (this can be screenshots of the payments you made or photocopied statements and receipts – include EVERYTHING)
  4. The Educational Opportunity Tax Credit Worksheet
  5. A letter from your school about the monthly benchmark loan payment (only if you graduated in 2008 or 2009)
Frequently Asked Questions

What if my monthly loan payments varies?

This is common and my monthly loan payments changed often. I provided screenshots of all my student loan payments from my three different loan vendors. I then totaled what I paid over 12 months and then divided by 12 to get a monthly average. I then used that monthly average on lines 2 and 3 of the worksheet. When I sent in all my paperwork to Maine Revenue Service I included a cover letter stating that I took the average of my total payments. The state will add everything up so make sure you double check everything!

What if the state sends me a letter asking for more information and/or denies my claim?

Call the state and see exactly what they want. If you are amending your tax returns then make sure you send each year separately. I made the mistake of including all four years in one envelope. The state quickly approved both 2010 and 2011 and then sent me a letter asking me for more information for 2012 and 2013. I called them to inform that I included all that information with the 52 pages of supporting documents that I mailed them. Apparently someone did not scan the paperwork correctly. These people are very nice but some of them might not understand the paperwork and/or how the tax credit works. I haven’t stress enough the important of crossing your “t’s” and dotting your “I’s.”

Do I need to include documentation every year I claim this credit?

Yes.

Where do I find the worksheets?

You can find State of Maine Tax Credit Worksheets on the Maine Revenue Service website here: http://www.maine.gov/revenue/forms/credits/2013.htm.

Like I mentioned above, The Education Opportunity Tax Credit can help you get hundreds or even thousands back each year just for paying your monthly student loan bills! If you’re smart then you will use the money you get back to help pay your loans off faster.

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