How Much Is State Income Tax in Maine?

Maine operates a progressive state income tax system for individuals. This means different portions of a taxpayer’s income are taxed at varying rates, with higher income levels subject to higher rates. Understanding this system is important for residents and individuals considering moving to the region.

Maine Individual Income Tax Rates

Maine’s individual income tax system has three distinct income tax brackets for the 2023 tax year. Tax rates and brackets can be adjusted annually, so taxpayers should consult the Maine Revenue Services website for the most current figures.

The lowest bracket applies a rate of 5.8% to taxable income up to $24,450 for single filers and married couples filing separately, and up to $48,900 for married couples filing jointly, qualifying widow(ers), and heads of household.

For single filers and married couples filing separately, taxable income between $24,451 and $54,950 is taxed at a rate of 6.75%. This bracket extends to taxable income between $48,901 and $109,900 for married couples filing jointly, qualifying widow(er)s, and heads of household.

The highest income bracket applies to taxable income exceeding $54,950 for single filers and married couples filing separately, and over $109,900 for married couples filing jointly, qualifying widow(er)s, and heads of household. This income is taxed at 7.15%.

Determining Your Maine Taxable Income

Your Maine taxable income begins with your gross income. This includes wages, salaries, tips, interest, dividends, business income, rental income, and capital gains. Adjustments are made from gross income to arrive at your Maine adjusted gross income (AGI). Common adjustments include deductions for contributions to certain retirement plans, specific self-employment tax deductions, and eligible health savings account (HSA) contributions.

After determining AGI, taxpayers choose between a standard deduction or itemizing deductions. For the 2023 tax year, Maine standard deduction amounts vary by filing status. For example, a single individual could claim $13,850; married couples filing jointly could claim $27,700. Taxpayers can itemize deductions if their eligible expenses exceed the standard deduction amount. Common itemized deductions include certain medical expenses exceeding a percentage of AGI, state and local taxes, and qualified charitable contributions.

Maine also allows personal exemptions, which further reduce taxable income. For 2023, the exemption amount is $4,700 per qualifying individual, including the taxpayer, their spouse, and any dependents. However, this exemption amount begins to phase out for taxpayers with higher AGIs, specifically when AGI exceeds $100,000 for single filers and $200,000 for married couples filing jointly. The combination of gross income, adjustments, deductions, and exemptions determines the income amount to which Maine’s progressive tax rates are applied.

Maine Tax Credits

Maine offers various tax credits that directly reduce an individual’s final income tax liability, providing a dollar-for-dollar reduction of the tax owed. These credits are generally more advantageous than deductions because they decrease the actual tax bill, rather than just the amount of income subject to tax.

One credit is the Child and Dependent Care Credit, which helps offset expenses incurred for the care of qualifying children or dependents. The credit amount is a percentage of the federal credit allowed for these expenses.

Another credit is the Property Tax Fairness Credit, designed to provide relief to eligible homeowners and renters from property taxes or rent paid. This credit has specific income and property tax/rent paid limitations and can be refundable, meaning taxpayers may receive a refund even if the credit amount exceeds their tax liability. Maine also provides a Credit for Income Tax Paid to Other Jurisdictions, which helps prevent double taxation when a resident earns income taxed by another state or foreign country.

Educational expenses can also lead to tax relief through various credits. For example, the refundable Educational Opportunity Tax Credit is available for certain student loan payments or tuition paid for qualifying degrees from a Maine institution. This credit aims to incentivize individuals to pursue higher education and remain in the state. Maine credits can be either refundable or non-refundable; non-refundable credits can reduce tax liability to zero but will not result in a refund, while refundable credits can lead to a refund if the credit amount exceeds the tax owed.

Filing and Payment Obligations

Individuals residing in Maine, or non-residents with Maine-source income, have a filing obligation if their gross income exceeds certain thresholds or if they are required to file a federal income tax return. For the 2023 tax year, a single individual under 65 must file if their gross income is over $13,850, while married couples filing jointly have a threshold of $27,700. These thresholds are typically aligned with the standard deduction amounts.

The annual deadline for filing a Maine individual income tax return, Form 1040ME, is April 15th, aligning with the federal deadline. If April 15th falls on a weekend or holiday, the deadline shifts to the next business day. Taxpayers who cannot file by the deadline can request an automatic six-month extension, pushing the filing date to October 15th. An extension to file is not an extension to pay any tax due.

Tax payments are commonly made throughout the year to ensure compliance and avoid penalties. For most employees, this occurs through employer withholding from their wages, which is remitted to Maine Revenue Services. Individuals who are self-employed or have substantial income not subject to withholding, such as rental income or investment earnings, are required to make quarterly estimated tax payments. These payments are due on April 15, June 15, September 15, and January 15 of the following year. Maine offers various payment methods, including online payments through the Maine Revenue Services website, electronic funds withdrawal when e-filing, or mailing a check or money order with the appropriate payment voucher.