TAX BURDEN FOR MAINE RETIREES:

NAVYSEABEE · **Posted:** January 23rd, 2010, 6:52 pm

TAX BURDEN FOR MAINE RETIREES: Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden. Following are the taxes you can expect to pay if you retire in Maine:

State Sales Tax: 5.0% (food and prescription drugs exempt)

Fuel & Cigarette Tax:
Gasoline Tax: 29.9 cents/gallon
Diesel Fuel Tax: 32.2 cents/gallon
Cigarette Tax: $2.00/pack of 20

Personal Income Taxes
Tax Rate Range: Low - 2%; High - 8.5% In 2010 the four current marginal tax rates (2%, 4.5%, 7%, and 8.5%) are replaced with a flat tax of 6.5% of Maine taxable income. Taxpayers with taxable income greater than $250,000 must pay an income tax surcharge equal to .35% of Maine taxable income in excess of $250,000.
Income Brackets: 4 (Lowest - $5,050; Highest - $20,150). For joint returns, the taxes are twice the tax imposed on half the income.
Personal Exemptions: Single - $2,850; Married - $5,700; Dependents - $2,850
Standard Deduction: Single - $5,450; Married filing jointly - $9,100. Beginning in 2010 the Maine standard and itemized deductions are repealed and replaced with several new tax credits.
Refundable household credit: Only resident individuals qualify; nonresidents and part-year residents do not qualify. The base credit amount is $700 for single tax return filers; $1,050 for head of household (HH) filers; $1,200 for married joint (MJ) filers; and $600 for married, but filing separate (MS) filers. The base credit amount is increased by $250 for each exemption allowed to be claimed on federal income tax returns. The credit is phased out by $1.50 for every $100 that Maine taxable income exceeds $27,500 for single filers; $41,250 for MS and HH filers; and $55,000 for MJ filers. The credit is refundable up to $70 for MJ returns and $50 for all other returns.
Elderly Credit. The credit is $60 for each taxpayer who is 65 years of age or older. The credit is phased out by $2 for every $100 of Maine adjusted gross income that exceeds: $32,000 for single filers; $26,000 for MS filers; $52,000 for MJ filers; and $48,000 for HH filers.

Additional Deductions: (2009) Single or head of household over 65 - $1,250; One spouse over 65 - $950; Both over 65 - $1,900; If over 65 and blind - add $2,500
Medical/Dental Deduction: Federal amount.
Federal Income Tax Deduction: None.
Retirement Income Taxes: You and your spouse (if married) may each deduct up to $6,000 of eligible pension income that is included in your federal adjusted gross income. Except for military pension benefits, the $6,000 cap must be reduced by any Social Security and Railroad Retirement benefits received, whether taxable or not. Deductible pension income includes state, federal and military pension benefits, as well as retirement benefits received from employee retirement plans.
Retired Military Pay: Follows federal tax rules.
Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.

Property Taxes
All real estate and personal property of Maine residents is subject to local and, if authorized by the legislature, state property taxes. Local property taxes, based upon assessed valuation, are assessed, levied and collected by municipalities. Homestead and veteran's exemption programs, administered by the state, are available to reduce property taxes for those who qualify. The Homestead Exemption program provides a measure of property tax relief for certain individuals that have owned homestead property in Maine for at least 12 months and make the property they occupy on April 1st their permanent residence. Property owners receive an exemption of $13,000 on the assessed value of their home. A Veteran exemption of $6,000 is available to those who served during a recognized war period, are 62 years or older, are receiving 100% disability as a veteran or became 100% disabled while serving. Paraplegic veterans who received a federal grant for a specially adapted housing unit may receive a $50,000 exemption. A blind exemption of $4,000 is available to those who are legally blind.
A senior citizen property tax credit for volunteer service has been approved by the legislature. A municipality may adopt an ordinance to allow resident homeowners who are at least 60 years of age to earn up to $750 in benefits by volunteering to provide services to the municipality. The municipality may establish procedures and additional standards of eligibility for the program. Because the volunteer benefits are not subject to Maine income tax, Maine adjusted gross income on the Maine individual income tax return may be reduced by the amount of the benefits, up to $750, to the extent included in federal adjusted gross income. For more information on property taxes refer to www.state.me.us/revenue/propertytax/homepage.html.

Inheritance and Estate Taxes
There is no inheritance tax. Maine has partially decoupled from the federal estate tax law. The amount exempt from the Maine estate tax is different from the amount exempt from federal estate tax. A person dying in 2008 would have their estate exempt for up to $1,0000,000. Refer to www.state.me.us/revenue/incomeestate/estate/index.htm for more information.
[Source: www.retirementliving.com Jan 2010 ++]

TAX BURDEN FOR MAINE RETIREES:

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