Maryland Student Loan Tax Credit: What You Should Know

Who gets a Maryland student loan tax credit?

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Some state residents may be eligible to claim a Maryland student loan tax credit in 2023. However, although credit recipients won’t receive the debt relief until they file their 2023 tax returns, the application deadline was September 15, 2023. Residents who missed the deadline might qualify for other types of tax credits (more on that below).

“This program offers Maryland residents a critical advantage when looking for options to pay off student loan debt,” said Gov. Wes Moore in a release announcing the $9 million in student loan tax credits awarded last year.

For the 2023 tax year, $18 million in tax credits are available. That’s twice the amount in 2023! Here’s what you need to know about claiming a student tax credit this year.

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Maryland student loan tax credit

The Maryland Student Loan Debt Relief Tax Credit Program offers tax credits to eligible Maryland residents. According to the Maryland Higher Education Commission, recipients of the credit will be prioritized for taxpayers who: 

  • Haven’t previously received the credit
  • Were eligible for in-state tuition
  • Graduated from a higher education institution located in Maryland
  • Have high debt-to-income ratios

The dollar amount granted as a tax credit may also be based on the above scenarios. However, it is important to note that you might still qualify for the Maryland student loan tax credit if none of the above criteria apply to your situation.

Who is eligible for the student loan tax credit?

Many Maryland residents qualify for the student loan tax credit. That’s because there are only three main requirements.

  • You must be a Maryland taxpayer.
  • You must have incurred at least $20,000 in student loan debt (graduate or undergraduate).
  • You must owe at least $5,000 in student loan debt when you apply for the credit.

How do I receive the credit? You will claim the tax credit if approved when you file your 2023 Maryland state tax return. If the credit exceeds your tax liability, you will receive the difference as a tax refund. Recipients of the Maryland student loan tax credit must use the entire credit amount to pay student loan debt. If the credit isn’t used for this reason, the taxpayer must pay the amount back to the state. 

Tax credits for student loan payments

Even if you don’t qualify for the Maryland student loan tax credit or if you didn’t have time to submit your application this year, you might be eligible for a federal education tax credit in 2023.

  • The American Opportunity Tax Credit (AOTC) is worth up to $2,500 per student and is partially refundable (meaning you could receive a portion of the credit back as a tax refund).
  • The Lifetime Learning Tax Credit (LLC) is worth up to $2,000 but is not refundable (meaning it can reduce your tax liability, but you won’t receive it back as a tax refund).
  • You may be able to claim a tax deduction for up to $2,500 of student loan interest paid in 2023 (this amount depends on your modified AGI).

Unlike the student loan tax credit for Maryland, you don’t have to use the federal tax credit amounts to pay down your student loans. However, taxpayers must meet specific criteria to claim these federal credits. So, students and graduates should read through the requirements carefully before claiming a credit or deduction on their federal tax returns.

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Katelyn Washington
Tax Writer

Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.