Maine Retirement

Any person who lives in Maine for more than 183 days out of the year will have to file a state income tax return or 1040. Even if you do not live in Maine you could have to file a state income tax return. Anybody who receives income from a source in Maine will have to pay the state income tax.

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Pension Income Deduction

You can deduct up to $6,000 in pension income from your Maine income tax return as long as that income is included in the adjusted gross income in your federal tax return. Married couples filing jointly can deduct up to $12,000 in pension income as long as it is listed on their federal tax return.

You no longer have to deduct Social Security and Railroad Retirement income from the Pension Income Deduction. This means most Maine residents will be able to take advantage of this deduction. To get this tax break you will have to complete the Pension Income Deduction Worksheet found in the Maine income tax booklet.

Retirement income that qualifies for the Pension Income Deduction includes: federal pensions, state pensions, military pensions, most private pensions, employee annuities, local government pensions, teacher's pensions, SIMPLE plans, and some deferred compensation plans. Some private pensions and IRAs may not qualify for this deduction so you will have to check with Maine Revenue Services before deducting them.

Maine Income Tax

Maine has a graduated income tax rate which means the more taxable income you have the more you pay. Married couples filing separately pay the same rate as single filers in Maine.

The lowest rate is 2% for individuals with up to $5,000 in taxable income and married couples filing jointly with up to $7,500 in taxable income. Individuals that have $5,000-$9,950 in taxable income and married couples filing jointly that have $7,500-$14,900 in taxable income pay a rate of 4.5%. Individual filers that make between $9,950 and $19,950 in taxable income and married couples filing jointly with between $14,900 and $29,900 in taxable income pay 7%. Married couples filing jointly who have more than $29,900 in taxable income and single filers with more than $19,950 pay a rate of 8.5%.

The standard income tax deduction in Maine is $5,800 for single filers, $9,650 for married couples filing jointly, $8,500 for head of household and $4,825 for married couples filing separately.

Maine Sales Tax

Maine has a state sales tax of 5% that applies to most retail transactions. There is also a state lodging tax of 7% and a car rental tax of 10%. Food purchased from grocery stores is exempt from sales tax in Maine. Food from restaurants and cooked food purchased from grocery stores is subject to a 7% tax. Propane and fuel oil used for heating is exempt for the state sales tax. Prescription drugs are exempt from the sales tax. There are local sales taxes in Maine so sales taxes can be higher in some areas.

Maine Property Tax

Maine has two kinds of property taxes, local property taxes collected by cities, towns and townships, and state property tax. In the Unorganized Territory (the part of Maine with no local government) the state collects the property taxes. Over half of Maine is in the Unorganized Territory. If your property is in the Unorganized Territory, Maine Revenue Services assesses and collects your property tax. If you live outside of it your local government handles your property taxes.

If you own a home you live in year round in Maine you could qualify for a $10,000 Homestead Property Tax Exemption. If you are a veteran and you are over 62 you could qualify for an additional $6,000 Property Tax Exemption">.

If the amount of property taxes you paid on your home in 2009 was more than 4% of your income you could qualify for a Circuit Breaker Property Tax Refund. To get this refund your income must be under $64,950 if you are single or $86,600 if you are married. If you rent your home you can qualify for this refund if your rent was more than 20% of your household income.

Capital: Augusta
Cost of Living Rank: #39
Sales Tax: 5.0%
Income Tax: 2.0% - 8.5%
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