What Is Maine’s Income Tax? Understanding Maine’s Tax System

Maine’s state income tax rates start at 5.8%, which is relatively high compared to other states. However, Maine has no local sales taxes. Estates under $6.41 million are exempt from Maine’s estate tax. Maine does not tax Social Security, Railroad Retirement, or military benefits. Any policy to lower Mainers’ tax burden must address both tax rates and income levels.

The corporate income tax ranges from 3.50% to 8.93%. Residents owe taxes on all taxable income, regardless of where they work. Maine’s tax structure is progressive, so greater income means greater taxes shared. Maine also has above-average property taxes. Groceries, medicine, and gasoline are exempt from sales tax in Maine.

Tax Rates and Rankings

Maine’s tax system ranks 35th overall. Maine has a 5.50% sales tax rate and no local sales taxes. The sales tax rate in Portland, Maine is also 5.5%.

Comparison with Other States

Of all the states, California has the highest individual income tax rates. Hawaii also has a high rate. Maine has the highest starting tax rate for the lowest income bracket at 5.8%, which is significant given that incomes in Maine are lower than in most states, pushing costs down to the local level.

Maine has affordable housing, a lower cost of living, and low crime rates, making it the safest state, popular among active retirees. However, taxes are substantial in Maine, with it being the 4th highest state in terms of the portion of income going to taxes. Despite this, there are advantages to living in Maine, such as an average family paying $1,279 in Maine income taxes, which is considered manageable.

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