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An Act To Allow an Income Tax Deduction for Interest Paid on Student Loans
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §5122, sub-§2, ¶PP  is enacted to read:
 
PP.  For taxable years beginning on or after January 1, 2017, an amount equal to the interest paid by the taxpayer during the taxable year on any qualified education loan, as defined in the Code, Section 221(d), adjusted as provided in this paragraph.
 
(1) The amount that would be deductible but for this subparagraph must be calculated in the same manner as the deduction allowed under the Code, Section 221, except that the maximum deduction is $5,000 and the amount of the reduction pursuant to the Code, Section 221(b)(2)(B) is calculated by substituting in the Code, Section 221(b)(2)(B)(i)(II) $65,000 for $50,000 and $130,000 for $100,000 in the case of a joint return.
 
(2) The amount calculated under subparagraph (1) must be reduced by any deduction for qualified education loans included in federal adjusted gross income.
 
SUMMARY
This bill provides an additional income tax deduction for interest paid on qualified education loans that exceeds the amount allowable under the United States Internal Revenue Code. The maximum deduction is increased from $2,500 to $5,000 and the modified adjusted gross income thresholds for phase-out of the deduction are increased by $15,000 for taxpayers filing as single individuals and $30,000 for individuals filing a joint return.