MAINE
Return to Retiree Tax Map
NICKNAME
The Pine Tree State
BOTTOM LINE: NOT TAX-FRIENDLY
Maine, like the majority of states, exempts Social Security benefits from state income taxes. Up to $6,000 per person of eligible pension income can be deducted. Residents with taxable income over $20,350 pay a steep 8.5% rate. Maine is one of a few states that do not allow cities and towns to impose their own local sales tax. Maine residents pay a 5% sales tax statewide on everything except food and prescription drugs.
STATE SALES TAX
A flat 5% statewide (food and prescription drugs are exempt); 7% for prepared food.
INCOME-TAX RANGE
Low: 2% (on less than $5,100 of taxable income).
High: 8.5% (on more than $20,350 of taxable income). Note: In 2013, the rate for the highest income bracket will drop from 8.5% to 7.95%.
SOCIAL SECURITY
Social Security benefits are not taxed.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Individuals may deduct up to $6,000 of eligible pension income that is included in federal adjusted gross income. Except for military pension benefits, the $6,000 deduction must be reduced by any Social Security and Railroad Retirement benefits received, whether taxable or not. Deductible pension income includes state government pensions (including out-of-state pensions), federal and military pensions, and retirement benefits received from employee retirement plans.
PROPERTY TAXES
Real estate is subject to local and, if authorized by the legislature, state property taxes. Local property taxes, based on assessed valuation, are assessed, levied and collected by municipalities.
The Homestead Exemption program provides property-tax relief for individuals who have owned homestead property in Maine for at least 12 months and make the property they occupy on April 1 their permanent residence. Property owners receive an exemption of $10,000 on the assessed value of their home.
Residents with income below $64,950 (single) or $86,600 (living with a spouse or dependent) may qualify for a $1,600 property-tax refund if the property tax exceeds 4% of household income or total rent payments exceed 20% of household income.
Tax breaks for seniors: A veterans' exemption of $6,000 is available to those who served during a recognized war period, are 62 or older, are receiving 100% disability as a veteran or became 100% disabled while serving. Paraplegic veterans who received a federal grant for a specially adapted housing unit may receive a $50,000 exemption. An exemption of $4,000 is available to those who are legally blind.
Seniors with household income below $14,700 (single) or $18,200 (living with a spouse or dependent) qualify for the $1,600 property-tax refund.
INHERITANCE AND ESTATE TAXES
Maine has no inheritance tax. Estates over $1 million are subject to Maine estate tax. Estate tax rates range from less than 1% to 16%. In 2013, the exemption level rises to $2 million, and estate tax rates will range from 8% to 12%.
Visit RetirementLiving.com for a complete rundown of taxes in Maine.
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