Maximize Your Benefits Under the 2019 Maryland Student Debt Relief Tax Credit

Eli Noff, Esq., Partner

Mary F. Lundstedt, Esq., Associate

In 2017, the Maryland Student Debt Relief Tax Credit was implemented to provide eligible Maryland taxpayers, even those who have already graduated, with at least a modicum of student loan forgiveness from the state government.[1] In January of 2019, Governor Hogan announced the program's results for tax year 2018, noting that Maryland awarded $9 million in tax credits to nearly 9,500 Maryland taxpayers with student loan debt.[2] Significantly, the 2019 application process opened on July 1st -with applications due no later than September 15th-so interested taxpayers should act now. Start the process by visiting: https://mhec.maryland.gov/preparing/Pages/StudentLoanDebtReliefTaxCredit.aspx

The purpose of the Maryland Student Debt Relief Tax Credit is to provide a tax credit to help graduate and undergraduate students pay down their student loan debt.[3] The Maryland Higher Education Commission (MHEC) administers the program. Only "qualified" Maryland taxpayers may claim this credit. A taxpayer is "qualified" if they: (1) incurred $20,000 or more in undergraduate or graduate student loan debt or both, and (ii) have at least $5,000 in outstanding undergraduate or graduate student loan debt or both when submitting the application for the credit.[4] However, it is worth noting that the Commissioner will "prioritize tax credit recipients and amounts based on qualified taxpayers who: (1) have higher debt burden to income ratios; (2) graduated from an institution of higher education located in the State; (3) did not receive a tax credit in a prior year; or (4) were eligible for in-State tuition." [5]

MHEC began accepting applications for 2019 tax credits on July 1st, 2019. Applicants are required to provide their official college transcripts and proof of educational loans. Additionally, a copy of the most recent Maryland income tax return must accompany the taxpayer's application. All applications are required to be notarized and submitted by September 15th. By December 15 of each year, MHEC will certify to the taxpayer the amount of any tax credit approved, not to exceed $5,000.[6]

Taxpayers should remember that the loan must be the student's loan-i.e., PLUS loans taken out by parents will not count towards the student debt threshold.[7] Furthermore, the MHEC will reclaim the tax credit if it does not receive written proof that the taxpayer has used 100% of the tax credit to pay down their debt within 2 years from the close of the taxable year in which the credit is awarded.[8]

If you want to learn more about the Maryland Student Debt Relief Tax Credit and how it can benefit you, contact Frost & Associates, LLC today at 410-497-5947.


[1] Md. Code, Tax-Gen. §10-740.

[2] https://governor.maryland.gov/2019/01/18/governor-larry-hogan-announces-9-million-in-tax-credits-for-student-loan-debt-relief/

[3] COMAR 13B.08.17.01.

[4] Md. Code, Tax-Gen. §10-740(a)(3).

[5] Md. Code, Tax-Gen. §10-740(d).

[6] Md. Code, Tax-Gen. §10-740(c)(2).

[7] COMAR 13B.08.17.02(H).

[8] COMAR 13B.08.17.03.D.

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