Tax season comes every year, and sometimes a bigger headache than actually paying your taxes is the process of figuring out and filing them. Taxes don’t have to be that much of a hassle, though — try out our state tax calculator to quickly get an idea of what you’ll owe this year.

It’s important that you fulfill all of your tax obligations, as failing to do so can lead to fines and penalties. The last thing you want to do during your summer vacation is worry about an audit. Make sure you’re informed as you head into tax season by reading through our guide to Maine’s state taxes.

The United States Federal Government maintains the right to tax its citizens. So, the largest portion of income taxes you’ll pay in a given year are federal. In addition to this, however, the federal government also grants the states of the union the right to levy taxes on their citizens. That means when it comes time to file, be aware that both federal and state taxes are required.

State taxes are often spent on necessary things like schools, roads, and emergency services. So, it’s not all bad that you’re paying them. All the same, you want to do them correctly to make sure you’re not overpaying and losing some of your hard-earned income, or underpaying, which could result in a costly and stressful audit.

Income taxes in Maine are progressive, so they increase along with income. It’s important to know that your tax burden in the Pine Tree State is not limited to income taxes, though. Like other states, Maine imposes taxes on property ownership, capital gains, a sales tax, and excise or “sin” taxes. Maine’s tax burden is not as high as some states, like New York and California, but it’s also not one of the lowest in the nation.

We’ll cover all that and more in this explainer, so you know what you need to when it comes time to file. Read through our guide to Maine state taxes to be sure you’re aware of all the taxes you are subject to, as well as where you might be able to claim valuable deductions, exemptions, and tax credits. From federal to state taxes, Community Tax is here to help.

The federal government’s income tax structure is progressive, and so is Maine’s state tax structure. That means the greater your income, the greater your fair share of taxes. The Pine Tree State has 3 rate schedules for three different filing statuses: Single or married filing separately, head of household, and married filing jointly. It’s important to note that the rates can change year-to-year depending on inflation and other factors.

Tax rates in Maine increase as your level of income increases. As mentioned, your specific rate of taxation will also depend on your filing status. The rates for each income bracket for each filing status are reproduced in the charts below.

Single & married filing separately

Heads of household

Married & spouses filing joint returns

If you’re having trouble determining your tax bracket or filing status, Community Tax can help. People with multiple revenue streams or complicated living situations may be uncertain about their bracket or status — it’s perfectly normal! That’s why our dedicated team of tax professionals is available to help walk you through everything you need to know about Maine’s income taxes.

The rates listed above are for the Maine personal income tax, which is a tax levied on the amount you make from your job. Maine’s personal income taxes are a separate tax from federal personal income taxes. These are paid directly to the state. Here are some quick facts regarding the Maine personal income tax:

• The median household income in Maine is $53,000
• For a single person, that puts them in the highest tax bracket of $3,222 plus 7.15% of excess over $50,750
• For a head of household or married couple filing jointly, that puts them in the middle bracket: $1,865 plus 6.75% of excess over $32,150 and $2,488 plus 6.75% of excess over $42,900, respectively.

Because of the progressive structure of Maine’s tax brackets, you pay only the sum and percentage above income at a given level — not on your entire income. This is helpful for those near the threshold who worry that they will be taxed at a higher rate than they can really handle. It also means that your effective tax rate is lower than the rate at your highest bracket, because all the money you make under that bracket is taxed at its respective rate.

Read on to find out more about the other taxes Mainers are responsible for.

Capital gains are money made through selling assets at a profit. This includes real estate as well as money made from selling shares on the stock market. The federal government taxes capital gains depending on the amount of money made from assets.

• The minimum rate for the federal government is 0% tax under about $40,000, and the maximum rate is 23% for amounts above around $440,000. (These are approximations, as rates change depending on the years.)

Maine also taxes capital gains. However, they are treated simply as another form of income. So, in order to find out what your total income tax burden is, you must add money made from work to money made from capital gains. The combined total determines your bracket for state taxes in Maine.

• Example: suppose you are a single filer making $50,000 a year, but you earn $3000 from the sale of stocks at a profit. This actually bumps you up to the next tax bracket, raising your rate from 6.75% to 7.15%.

Sales taxes are a tax added to most transactions on goods and services that occur within the state. You are probably familiar with sales tax: it’s the amount of money added to the price of goods at the register when you go to pay. However, you might not be familiar with use tax.

Use taxes are a way for states to maintain competition when transactions occur across state lines. That means that, even if you purchase something from, say, New Hampshire (which has no sales tax), you’ll still have to pay a use tax on that item. The use tax is equal to the sales tax in Maine: both are a baseline of 5.5%.

However, it’s important to note that this flat rate does not apply to all products that you might encounter. Certain goods and services are taxed at a higher rate than the general sales and use tax rate. These include:

• Prepared food: 8%
• Lodging rentals: 9%
• Short-term car rentals: 10%

Medical marijuana is also taxed at the regular sales tax rate, however, prepared food containing medical marijuana is taxed at the rate for prepared food (8%).

Maine levies excise taxes on alcohol, tobacco, and fuels. Certain excise taxes are sometimes also known as “sin taxes” because they are applied to goods or services that are considered harmful if used excessively. Commonly taxed “sins” include alcohol, tobacco, gasoline, sex work, and marijuana in states where it’s legal. In this section, we’ll cover the rates for different excise taxes imposed in Maine.

Alcohol

In Maine, as with many states, the rate of taxation levied on alcoholic beverages is based on the percentage volume of alcohol in the drink. So, beer, wine, and hard liquor or spirits are all taxed differently. These are the three different rates in Maine:

• Maine Beer Tax - $0.35 per gallon, 18th highest in the country
• Maine Wine Tax - $0.60 per gallon,32nd highest wine tax in the country
• Maine Liquor Tax - $12.00 per gallon, the 9th highest liquor tax in the country.

Tobacco

Maine also taxes the sale of tobacco. Like many states, Maine’s tobacco taxes are high because of the adverse health effects associated with its consumption. Rates vary depending on the kind of tobacco product in question. These are the rates for 2019:

• $2.00 per pack of cigarettes, the 15th highest in the US.
• $2.02 tax per ounce of smokeless tobacco
• 20% for all other tobacco products

Fuel

Taxes on fuel are often used to supplement funds for repairing roads and bridges and maintaining other key aspects of infrastructure. This may lead to higher prices at the pump, but is vital in making sure that roads are actually usable and safe to drive on. These are Maine’s tax rates for a few common fuels:

• Gas: 28.4 cents per gallon
• Diesel: 29.6 cents per gallon
• Propane: 20.6 cents per gallon
• Jet fuel: 3.4 cents per gallon
• Biodiesel: 20.7 cents per gallon

Due to a change in the Affordable Care Act legislation, Mainers no longer have to worry about paying a fee for not having healthcare.

Mainers should know that the state also collects a 2% tax on insurance premiums imposed by insurance companies. While this is not something that citizens directly pay for, it may affect the cost of insurance premiums.

Property taxes are paid based on the assessed value of your home or other property. Property taxes are levied on a county-by-county basis, so there is no statewide rate for property tax. However, there isn’t too much variation among Maine’s few counties.

Here are a few quick facts regarding property taxes in Maine:

• The state’s lowest rates are found in Washington County: 1.04%
• The average in Maine is 1.09%
• The highest rates in the state are found in Cumberland County: 1.2%
• Overall, there’s much less variation among counties than is found in other states.
• The difference between the lowest and the highest rate is only 0.16%
• The average rate in Maine is 1.09%, 18th in the country
• The median income in Maine is $56,277
• Property taxes are 3.51% of income in Maine, 17th highest in the country
• Generally, property taxes are higher in the more southern (and urban) counties in Maine.

How are property values assessed?

In the United States, every one to five years, a government official value assessor may visit your municipality and assess the value of properties. Property values around town are likely to change with fluctuations in the market, so it’s possible that your precise rate of property tax will change from year to year

It’s good to know this heading into tax season, because your property’s value may have increased or decreased — and so might your property taxes— since the last time you filed.

Maine is one of the 13 states in the Union that imposes an estate tax, along with states like New York and New Jersey. Estate taxes are levied on estates left behind after someone passes away. As of 2019, the estate tax is only applicable to estates valued at $5.7 million or more. So, for most taxpayers and their surviving families, this will not be a relevant concern.

These are the current rates for an estate passed down on or after January 2019.

We’ll start by outlining a few state tax credits that Mainers can benefit from:

• Earned income credit: This credit mirrors the federal earned income tax credit and is available to those who qualify for that program.
• Low income tax: Those who make less than $2000 in taxable income can have their entire tax liability covered by this credit — essentially, they owe no state taxes.
• Credit for wellness programs: Employers with 20 or fewer employees who implement wellness programs at their companies are eligible for a credit of $100 per employee.
• Income tax credit for childcare expenses: This credit also mirrors its federal equivalent, granting a tax credit to anyone who pays someone to take care of a dependent under the age of 13 or otherwise unable to take care of themselves.

A full list of Maine tax credits is available online.

Deductions are another way that the government and states reduce taxpayers’ burdens. In Maine, the standard deduction — that’s the amount anyone can claim if they’re not claiming itemized deductions — is equal to the federal amount: 24,400 for joint filers and 12,200 for single filers.

Maine also offers itemized deductions on your tax returns: these are individual claims for a lower tax burden, rather than the lump-sum standard deduction. Maine’s tax deductions are based on the deductions that you claimed on your federal 1040 tax form and applies that number to you state taxes. Itemized deductions include:

• Federal deductions from form 1040 Schedule A, line 17
• Income obtained from a pass-through financial institution
• Medical and dental expenses
• State and local real estate taxes you paid from federal Form 1040, Schedule A, line 5b
• Personal property taxes you paid from federal Form 1040, Schedule A, line 5c

In addition to tax credits, and standard and itemized deductions, Maine also offers a personal exemption. This exemption is applicable to a taxpayer — and their spouse if the two are filing jointly. The personal exemption is worth $4,200.

The personal exemption in Maine is $4,200

We understand that filing your Maine tax return on top of your federal tax return can be a hassle. Plenty of people have many possible taxable sources of income: that includes property, your paycheck, capital gains, and any estate you may have inherited. It can be hard to keep everything in order.

When you sit down to sort out the year’s taxes, it’s important to keep the following items nearby:

• Your previous year’s tax returns.
• All W-2’s sent to you by your employers.
• Statements of earnings on any investments you’ve made.
• Statements from any estates you may have inherited.
• Your Social Security number.
• Paperwork and proof you may need for exemptions you’re applying for.

If you need a little extra help on your state and federal tax returns, it’s worth thinking about consulting with a tax expert. Community Tax’s team of experienced tax prepares will be sure to get can help you get the refund you deserve — and help prevent costly audits.

When it comes time to pay your taxes in Maine, you only have a couple of options. The easiest is to pay online with EZ Pay, which allows you to directly pay from your bank account. Unfortunately, credit card payments are not allowed. If your tax burden is more than you can handle all at once, payment plans may be allowed in certain cases.

Now that you’ve labored your way through our guide to Maine’s state taxes, why not reward yourself with a few fun and interesting facts regarding the Pine Tree State.

Maine Tax facts

The median household income in Maine is $53,000, which is slightly lower than the median for the USA of around $57,000. Mainers, however, enjoy a shorter commute than many other Americans: a relaxing 22 minutes on average. Unfortunately, if you’re a fan of wild blueberries, the state does impose an additional 1.5 cent tax on purchasing them.

As you know, state taxes are not the end of your tax burden. You’ll also be responsible for your federal taxes every year. Tax brackets and the various rules involved in calculating them are different at the federal level than at the state level. If you find that you’re having trouble navigating the complicated systems of federal taxation, reach out to a Community Tax representative! Our tax preparation experts are here to help you make the most of your yearly returns, and do everything we can do help you avoid a costly audit.

Sources:

DataUSA.io, Maine; Census.gov, Maine Quick Facts, USA Quick Facts; Maine Revenue Services, Individual Income Tax 2018 Rates, Sales, Use and Service Provider Tax Rates & Due Dates, Individual Income Tax (1040ME), Maine Income Tax Credits; Maine Legislature, Title 28, Title 36; Tax Foundation, How High are the Cigarette Taxes in Your State, How High are the Wine Taxes in Your State, How High are the Beer Taxes in Your State, How High are Distilled Spirit Taxes in Your State, 2019 State Fuel Excise Taxes; Tax-Rates.org, Maine Property Taxes by County