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Maine Retirement Tax Friendliness

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Overview of Maine Retirement Tax Friendliness

While Maine does not tax Social Security income, other forms of retirement income are taxed at rates as high as 7.15%. It also has above average property taxes.

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Annual Wages
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Location
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Year of Birth
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Annual Income from Private Pension
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Annual Income from Public Pension
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You will pay of Maine state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
  • Our Tax Expert

    Jennifer Mansfield, CPA Tax

    Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.

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Maine Retirement Taxes

Photo credit: ©iStock.com/KeithBinns

According to the National Oceanic and Atmospheric Administration, Maine has 3,478 miles of coastline, fourth most of any state. That means plenty of space to sail, swim, kayak or watch the sunrise. Those are all good reasons to choose Maine as a retirement destination, but what about the state’s tax system?

Compared to other states, Maine has relatively punitive tax rules for retirees. While it does not tax Social Security income, other forms of retirement income are taxed at rates as high as 7.15%. It also has above average property taxes. However, the estate tax exemption here is among the highest state exemption levels.

A financial advisor in Maine can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial plans, including taxes, homeownership, insurance and estate planning, to make sure you are preparing for the future.

Is Maine tax-friendly for retirees?

Social Security is exempt from taxation in Maine, but other forms of retirement income are not,. Seniors who receive retirement income from a 401(k), IRA or pension will pay tax rates as high as 7.15%, though a small deduction is available.

The state’s property taxes are somewhat higher than the national average at a 1.30% effective rate. Maine's estate tax exemption threshold is $5.8 million for 2021, which is high for a state figure, albeit still well below the federal threshold of $11.7 million for 2021.

Is Social Security taxable in Maine?

All Social Security income in Maine is exempt from the state income tax. Any Social Security income included in your federal Adjusted Gross Income (AGI) should be subtracted out of your Maine income when filing you state income tax return.

Are other forms of retirement income taxable in Maine?

Income from retirement savings accounts like an IRA or 401(k) is taxable. Pension income, whether from a public employee pension fund or from a private employer, is also taxable.

Maine does allow for a deduction of up to $10,000 per year of pension income. However, that deduction is reduced in an amount equal to your annual Social Security benefit. So, for example, if you receive $12,000 in Social Security benefits this year, you cannot claim the deduction on your other forms of retirement income. In that case, all your other retirement income will be taxed as part of your gross income at the rates shown in the bracket table below.

Income Tax Brackets

Single Filers
Maine Taxable IncomeRate
$0 - $22,0005.80%
$22,000 - $52,6006.75%
$52,600+7.15%
Married, Filing Jointly
Maine Taxable IncomeRate
$0 - $44,4505.80%
$44,450 - $105,2006.75%
$105,200+7.15%
Married, Filing Separately
Maine Taxable IncomeRate
$0 - $22,0005.80%
$22,000 - $52,6006.75%
$52,600+7.15%
Head of Household
Maine Taxable IncomeRate
$0 - $33,3005.80%
$33,300 - $78,9006.75%
$78,900+7.15%

How high are property taxes in Maine?

A typical Maine homeowner can expect to pay about $1,300 in property taxes for every $100,000 in home value. While this rate is higher than the national average, the median home value in Maine is lower than the national median at $200,500.

What is the Maine homestead exemption?

Maine homeowners whose home is their permanent residence and they've owned it for at least 12 months are eligible for the homestead exemption. It is worth up to $25,000, which is subtracted from the home’s taxable value prior to the application of local tax rates.

Senior veterans are also eligible for the veteran exemption. It is equal to $6,000 and available to any veteran who is 62 or older.

Photo credit: ©iStock.com/jmorse2000

How high are sales taxes in Maine?

The state sales tax rate in Maine is relatively low at 5.5%, but there are no additional county or city rates collected on top of that. Therefore, 5.5% is the highest possible rate you can pay in the entire state of Maine.

Seniors also benefit from a number of major sales tax exemptions. Items exempt from the sales tax in Maine include groceries, prescription drugs and durable medical equipment, such as wheelchairs.

What other Maine taxes should I be concerned about?

The Maine estate tax applies to all estates with a taxable value of $5.8 million or higher in 2021.