Tool | November 2017

State-by-State Guide to Taxes on Retirees

Maine

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The Bottom Line
Map of Maine

Mixed Tax Picture

The Pine Tree State, like the majority of states, exempts Social Security benefits from state income taxes. As of 2014, the pension income exemption increased by $4,000; up to $10,000 per person of eligible pension income can now be deducted. Although the top state income tax rate has fallen in recent years from 8.5% to 7.15%, the top rate is still high. 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 5.5% sales tax statewide on most everything, except some food items and prescription drugs.

State Sales Tax

State levy of 5.5%.

Income Tax Range

Low:5.8% (on taxable income less than $21,100 for single filers; less than $42,100 for joint filers)

High: 7.15% (on taxable income more than $50,000 for single filers; more than $100,100 for joint filers)

Effective income tax rate: 6.1%/individual, 6.6%/joint

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Individuals may deduct up to $10,000 of eligible pension income that is included in federal adjusted gross income. Except for military pension benefits, the $10,000 deduction must be reduced by any Social Security and Railroad Retirement benefits received, whether taxable or not. The subtraction modification includes all federally taxable pension income, annuity income and IRA distributions, except pickup contributions for which a deduction has been allowed. Starting in 2016, all retirement benefits received under a military retirement plan that are included in a taxpayer's federal adjusted gross income are excluded from Maine taxable income.

IRAs

Qualifies for pension-income exemption of up to $10,000.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for pension-income exemption of up to $10,000.

Private Pensions

Qualifies for pension-income exemption of up to $10,000.

Public Pensions

Qualifies for pension-income exemption of up to $10,000. Starting in 2016, all retirement benefits received under a military retirement plan that are included in a taxpayer's federal adjusted gross income are excluded from Maine taxable income.

Property Taxes

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.

Low-income residents who owned or rented a principal residence anytime during the tax year may qualify for the Maine Residents Property Tax Fairness Credit.

The median property tax on Maine's median home value of $174,800 is $2,335.

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.

Those age 65 or older who qualify for the Maine Residents Property Tax Fairness Credit can receive a credit of up to $900, $300 more than those younger than 65.

A senior citizen property tax credit for volunteer service is available. A municipality may adopt an ordinance to allow resident homeowners who are at least 60 years old to earn up to $750 in benefits by volunteering to provide services to the municipality. The benefits are not subject to Maine income tax.

Inheritance and Estate Taxes

Maine has no inheritance tax. It does have an estate tax, with the exemption matched to federal thresholds ($5.49 million in 2017). Estate tax rates range from 8% to 12%.