What Are Maine’s State Taxes? Income, Sales & More

State governments across the United States levy various taxes to generate revenue, which in turn funds a wide array of public services, including education, infrastructure, and public safety. Maine, like other states, maintains its own distinct tax system designed to support these governmental functions. This overview explores the primary state taxes in Maine, detailing how they are structured and applied.

Individual Income Tax in Maine

Maine imposes a progressive individual income tax on the earnings of its residents and on income earned from Maine sources by non-residents. Taxable income in Maine largely aligns with federal taxable income, with state-level adjustments.

For the 2024 tax year, Maine’s individual income tax system features three progressive tax brackets. Rates vary from 5.8% for lower income thresholds, progressing to 6.75% for intermediate incomes, and reaching 7.15% for higher taxable incomes. For single filers, the 5.8% rate applies to income up to $26,050, then 6.75% for income between $26,050 and $61,600, and 7.15% for income exceeding $61,600. Married individuals filing jointly have different thresholds, with the 5.8% rate applying to income up to $52,100, 6.75% for income between $52,100 and $123,250, and 7.15% for income over $123,250.

Maine offers a standard deduction that taxpayers can claim to reduce their taxable income, similar to federal rules. For 2024, the standard deduction is $14,600 for single filers and married persons filing separately, and $29,200 for joint filers. A personal exemption of $5,000 is also available. These amounts are subject to inflation adjustments annually.

Tax returns for Maine individual income tax are due by April 15, aligning with the federal income tax deadline. Residents required to file a federal return must also file a Maine return. Non-residents with Maine-source income may also need to file.

Sales and Use Tax in Maine

Maine levies a statewide sales and use tax on the retail sale of tangible personal property and certain services. Unlike some other states, Maine does not impose additional local sales taxes, so the rate remains consistent statewide. The general sales tax rate is 5.5%.

Specific items and services have different sales tax rates. For example, prepared food and alcoholic drinks sold for on-premises consumption are taxed at 8%. Short-term rentals of living quarters, such as hotel stays, have a rate of 9%. Certain short-term rentals of vehicles are taxed at 10%.

The use tax complements the sales tax, applying to goods and services purchased outside the state for use within Maine where sales tax was not collected. Consumers are responsible for remitting use tax directly to the state if a retailer does not collect sales tax. Common examples of taxable items include clothing, electronics, furniture, and household goods.

Certain items are exempt from Maine sales tax. Groceries, referring to unprepared food items, are generally exempt. Prescription medications and certain medical equipment are also exempt. Businesses collect sales tax from customers and remit it to Maine Revenue Services.

Corporate Income Tax in Maine

Maine imposes a corporate income tax on corporations generating income from sources within the state. This tax applies to the adjusted federal taxable income of corporations. Maine’s corporate income tax system is graduated, meaning the tax rate increases as a corporation’s income rises.

For the 2024 tax year, corporate income tax rates begin at 3.5% for income up to $350,000. The rate is 7.93% for income between $350,000 and $1.05 million, and 8.93% for income over $3.5 million.

A corporation typically has a taxable connection, or “nexus,” with Maine if it is organized or commercially domiciled in the state. Nexus can also be established if a corporation exceeds certain thresholds, such as $250,000 in property, $250,000 in payroll, or $500,000 in sales within Maine. Corporations subject to federal corporate income tax and having Maine income must file a Maine Corporate Income Tax return (Form 1120ME).

For multi-state businesses, Maine employs apportionment rules to determine the portion of a corporation’s total income taxable within the state. This process allocates income based on factors such as sales, property, and payroll located within Maine. S corporations are generally not subject to this tax unless they have federal taxable income at the corporate level.

Other Key Maine Taxes

Beyond individual income, sales, and corporate income taxes, Maine levies several other taxes that contribute to state and local revenue.

Property Tax

Property tax is primarily assessed and collected at the local, municipal level rather than directly by the state government. Municipalities determine their own property tax rates, which can vary based on local budgets and needs. Property taxes apply to real estate, including land and buildings, and are based on the assessed value. The average effective property tax rate in Maine is around 0.96% of owner-occupied housing value.

Fuel Tax

Maine imposes a fuel tax on gasoline and diesel purchased within the state. This tax funds the construction and maintenance of Maine’s roads and bridges. For gasoline, the tax rate is 30 cents per gallon.

Lodging Tax

A lodging tax is applied to short-term rentals and hotel stays across Maine. This tax is distinct from the general sales tax.

Estate Tax

Maine has an estate tax, which applies to the value of a deceased person’s estate. For 2024, the Maine estate tax exemption amount is $6,800,000. The estate tax rates are progressive, ranging from 8% to 12%, depending on the estate’s value.