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 median property tax on Maine's median home value of $176,000 is $2,329.

Tax breaks for seniors: Those 65 or older who qualify for Maine Residents Property Tax Fairness Credit program can receive an extra $300. Veterans 62 and older can exempt $6,000 from their assessed value. Maine municipalities can let low-income seniors earn a $750 credit on their property taxes by doing community service work.

Vehicle Taxes

Sales tax is due. An annual excise tax is also levied. The rate depends on a car’s age and value (set by the original MSRP, or window sticker price). Example: The owner of a three-year-old car with an MSRP of $19,500 would pay an excise tax of $263.

Inheritance and Estate Taxes

Maine's estate-tax exemption is indexed to the federal limit: $11.2 million for 2018. Tax rates range from 8% to 12%.