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WES MOORE, Governor Ch. 755
Chapter 755
(Senate Bill 805)
AN ACT concerning
Income Tax – Student Loan Debt Relief Tax Credit – Alterations
FOR the purpose of altering certain provisions of law governing the recapture of certain
amounts of the credit against the State income tax for certain individuals with
student loan debt to require the recapture of the unused amount of the credit rather
than the total amount; authorizing the Maryland Higher Education Commission to
extend the period of time that an individual who claims the credit has to prove that
the individual used the credit to repay the individual’s student loan debt under
certain circumstances; and generally relating to the Student Loan Debt Relief Tax
Credit.
BY repealing and reenacting, with amendments,
Article – Tax – General
Section 10–740
Annotated Code of Maryland
(2022 Replacement Volume and 2025 Supplement)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Tax – General
10–740.
(a) (1) In this section the following words have the meanings indicated.
(2) “Commission” means the Maryland Higher Education Commission.
(3) “Qualified taxpayer” means an individual who has:
(i) incurred at least $20,000 in undergraduate or graduate student
loan debt or both; and
(ii) has at least $5,000 in outstanding undergraduate or graduate
student loan debt or both when submitting an application under subsection (c) of this
section.
(b) Subject to the limitations of this section, a qualified taxpayer may claim a
credit against the State income tax for the taxable year in which the Commission certifies
a tax credit under this section.
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Ch. 755 2026 LAWS OF MARYLAND
(c) (1) (i) By September 15 of each year, an individual shall submit an
application to the Commission for the credit allowed under this section.
(ii) The individual shall submit with the application an assurance
that the individual will use any credit approved under this section for the repayment of the
individual’s undergraduate or graduate student loan debt or both as soon as practicable.
(iii) 1. [The total] EXCEPT AS PROVIDED IN SUBPARAGRAPH
(IV) OF THIS PARAGRAPH, THE amount of the credit claimed under this section THAT
WAS NOT USED TO REPAY THE INDIVIDUAL’S UNDERGRADUATE OR GRADUATE
STUDENT LOAN DEBT shall be recaptured if the individual does not use the ENTIRE credit
approved under this section for the repayment of the individual’s undergraduate or
graduate student loan debt or both within 3 years from the close of the taxable year for
which the credit is claimed.
2. The individual who claimed the credit shall pay the [total]
UNUSED amount of the credit claimed as taxes payable to the State for the taxable year in
which the event requiring recapture of the credit occurs.
(IV) THE COMMISSION MAY GRANT AN EXTENSION OF THE
PERIOD WITHIN WHICH THE INDIVIDUAL IS REQUIRED TO USE THE CREDIT CLAIMED
FOR THE REPAYMENT OF THE INDIVIDUAL’S UNDERGRADUATE OR GRADUATE
STUDENT LOAN DEBT IF THE INDIVIDUAL WAS UNABLE TO REPAY THE STUDENT
LOAN DEBT DUE TO:
1. A PERIOD OF FORBEARANCE RELATED TO LITIGATION
CONCERNING THE FEDERAL SAVING ON A VALUABLE EDUCATION (SAVE) STUDENT
LOAN REPAYMENT PLAN;
2. THE INABILITY OF THE INDIVIDUAL TO CHANGE FROM
ONE INCOME–BASED REPAYMENT PLAN TO ANOTHER PLAN DUE TO UNDERSTAFFING
AT THE U.S. DEPARTMENT OF EDUCATION; OR
3. A PERIOD OF FORBEARANCE DURING WHICH THE
INDIVIDUAL WAS AWAITING AN AGREEMENT UNDER THE FEDERAL PUBLIC SERVICE
LOAN FORGIVENESS BUYBACK PROGRAM AND UNABLE TO MAKE ANY STUDENT
LOAN DEBT PAYMENTS.
(2) By December 15 of each year the Commission shall certify to the
individual the amount of any tax credit approved by the Commission under this section,
not to exceed $5,000.
(3) (i) For tax year 2025, the total amount of tax credits approved by
the Commission under this section may not exceed $9,000,000.
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WES MOORE, Governor Ch. 755
(ii) For any taxable year after 2025, the total amount of tax credits
approved by the Commission under this section may not exceed $18,000,000.
(4) (i) Except as provided in subparagraph (ii) of this paragraph, the
Commission shall reserve $9,000,000 of the tax credits authorized under paragraph (3) of
this subsection for the following individuals in the following order of priority:
1. State employees who graduated from institutions of
higher education in the State where at least 40% of the attendees are eligible to receive
federal Pell Grants; and
2. all other State employees not described under item 1 of
this subparagraph.
(ii) If the total amount of tax credits applied for by individuals
described under subparagraph (i) of this paragraph is less than $9,000,000 for a taxable
year, the Commission may make available the unused amount of credits for use by other
qualified taxpayers.
(5) To claim the tax credit allowed under this section, an individual shall
attach a copy of the Commission’s certification of the approved credit amount to the income
tax return.
(d) Subject to subsection (c)(4) of this section, the Commission shall prioritize tax
credit recipients and amounts based on the following criteria:
(1) whether the qualified taxpayers are graduates from institutions of
higher education in the State where at least 40% of the attendees are eligible to receive
federal Pell Grants; and
(2) in an order of priority determined by the Commission, whether the
qualified taxpayers:
(i) have higher debt burden to income ratios;
(ii) graduated from an institution of higher education located in the
State;
(iii) did not receive a tax credit in a prior year; or
(iv) were eligible for in–State tuition.
(e) If the tax credit allowed under this section in any taxable year exceeds the
total tax otherwise payable by the qualified taxpayer for that taxable year, the qualified
taxpayer may claim a refund in the amount of the excess.
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Ch. 755 2026 LAWS OF MARYLAND
(f) The Commission shall establish and implement by September 1, 2024, an
outreach and marketing plan to:
(1) make eligible taxpayers aware of the availability of the tax credit
provided under this section; and
(2) encourage institutions of higher education in the State to advise new
graduates, particularly those with an interest in public service, of the availability of the tax
credit provided under this section.
(g) (1) On or before January 1 each year, the Commission shall report to the
Governor and, in accordance with § 2–1257 of the State Government Article, the General
Assembly on:
(i) the number of applicants for the tax credit authorized under this
section;
(ii) the number and amounts of tax credits awarded under this
section to qualified taxpayers;
(iii) a breakdown of the age, gender, race, income, and counties of
residency of qualified taxpayers who receive the credit; and
(iv) any additional information that the Commission deems relevant.
(2) On or before January 1, 2026, the Commission shall report to the
Governor and, in accordance with § 2–1257 of the State Government Article, the General
Assembly recommendations for changes to statute or regulations that would better target
the allocation of tax credits under this program.
(h) The Commission shall adopt regulations to carry out the provisions of this
section.
(i) The tax credit under this section shall be referred to as the Student Loan Debt
Relief Tax Credit.
SECTION 2. AND BE IT FURTHER ENACTED, That, on or before October 1, 2026,
the Maryland Higher Education Commission shall adopt procedures by which an individual
may apply for the waiver described under § 10–740(c)(1)(iv) of the Tax – General Article,
as enacted by Section 1 of this Act.
SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect July
1, 2026, and shall be applicable to all taxable years beginning after December 31, 2025.
Approved by the Governor, May 26, 2026.
–4–Every fact on this page links to its source, starting with the official bill record.