Proposed House bill offers tax credit for student loans
Michigan’s House of Representatives introduced a bill on Feb. 5 that, if passed, would offer tax credits to individuals who have received a bachelor’s degree from a qualified university for the amount paid on student loans for that tax year.
HB 4182 would offer qualified taxpayers a credit of up to 50 percent of the amount paid on student loans in a tax year, but not more than 20 percent of the average yearly tuition of Michigan’s public universities. For individuals receiving a credit that exceeds the amount of taxes the individual is required to pay, the exceeding amount would be refunded.
Rep. Sam Singh (D-East Lansing) co-sponsored the bill and said it is modeled after a program in the state of Maine.
Over the last decade a lot of college graduates have left the state, and the bill is an effort to support people who are graduating college.
“It’s a way for us to try to provide an incentive for Michigan university graduates to stay in the state of Michigan,” Singh said.
To qualify for the credit, which reduces the amount of taxes paid, taxpayers must have received a bachelor’s degree from an approved educational institution of Michigan, be paying off student loans, and both reside and be employed in the state.
Graduates are not the only ones rewarded, though. In certain situations, businesses offer to pay their employees’ student loans as an incentive to work for them. The proposed bill would offer those businesses a tax credit of the same percentage that an individual is entitled to.
However, if businesses receive a credit that exceeds the tax liability for that year, the exceeding amount will not be refunded. Instead, it will be carried forward to offset tax liabilities for either the next 10 tax years or until the amount is used up.
In its current state, the bill must first be reviewed by the House Committee on Tax Policy, which may happen soon, said Rep. Rob VerHeulen (R-Walker). “Typically they go to the committee and either don’t come out at all, or come out in a different form,” VerHeulen said of proposed bills.
From there it can be considered by the House as a whole, then evaluated by the Senate and finally by the governor.
Singh said he is hopeful that the bill will go before the House so the sponsors can present reasons on why it would be good for residents of the state. “Our hope is that the Committee on Tax Policy will take this up, but we won’t know that until later this year,” he said.
Rep. Roger Victory (R-Hudsonville), does not currently have a stance on the bill, but is concerned with how much it will cost the state, a spokesperson for Victory said.
No other state tax credits currently exist for student loans, but deductions and other credit opportunities are available to current students, including the American Opportunity credit and the Lifetime Learning credit.
Matt McLogan, vice president of university relations for Grand Valley State University, said the bill probably would not affect GVSU, but students and their families could benefit from it.
“Tax situations vary by individual and we always suggest that students and parents with benefit questions consult a tax adviser,” McLogan said.
For more information on educational tax credits and deductions, visit www.irs.gov.
To view the proposed bill, visit www.legislature.mi.gov and search for HB 4182.