2015 Maine Tax Law Changes

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Richard B. Dawson, CPA Craig M. Pike, CPA
David E. Smith, CPA Patricia S. Hodgdon, CPA
Eric A. Purvis, CPA/ABV, MST, CVA Jeremy S. Handlon, CPA
Joel H. Bassett, CPA/PFS, CMA, CIA Michael P. Kelly, CPA
Kirk J. Purvis, CPA, CFERyan W. Dawson, CPA
William H. Souter, CPA, MSTJeffery W. Hicklin, CPA
Adam P. Johnson, CPABenjamin E. Gosselin, CPA, CFE

Dear Clients and Other Friends:

On June 30, 2015, the Maine legislature voted to override Governor LePage’s veto of the State’s 2016-2017 budget bill. The following is a summary of the significant tax related provisions:

Individual Income Tax Rates and Brackets

  • The legislation sets forth new income tax rates of 5.8%, 6.75% and 7.15% for tax years beginning on or after January 1, 2016.
  • For single taxpayers, the highest tax bracket has been set at $37,500 for tax years beginning on or after January 1, 2016 and $50,000 for tax years beginning on or after January 1, 2017.
  • For married taxpayers filing joint returns, the highest tax bracket has been set at $75,000 for 2016 and $100,000 for 2017.

Standard Deduction and Itemized Deductions

  • For tax years beginning on or after January 1, 2016, the standard deduction will no longer be equal to the federal standard deduction.  In 2016, it will be $11,600 for single taxpayers and $23,200 for married taxpayers filing joint returns.
  • The provision which was scheduled to provide some relief to the itemized deductions cap by allowing $18,000 of charitable contributions in excess of the cap in 2016 and all contributions in excess of the cap in 2017 has been repealed.
  • For tax years beginning on or after January 1, 2016, single taxpayers will start to have their standard deduction or itemized deductions phased out when they reach Maine adjusted gross income of $70,000 and their deduction will be fully phased out when they reach Maine adjusted gross income of $145,000.
  • Married taxpayers filing joint returns will have their standard or itemized deductions phased out between $140,000 and $290,000.

Deductions and Credits

  • There have been a number of deductions and credits repealed in this legislation.  The most significant being: the deduction for long-term care premiums; the deduction for contributions to IRC Sec. 529 college tuition plans; and the jobs and investment credit.
  • The legislation has added a new deduction for retirement plan benefits received under a military retirement plan that are included in federal adjusted gross income.
  • It has also added a new credit called the Sales Tax Fairness Credit which is based on the number of personal exemptions reported on an individual’s return.  The credit can be as much as $180 in 2016, but is phased out when taxpayers exceed certain income thresholds.
  • The credit for educational opportunity has been modified to include qualified individuals who (after December 31, 2015) received an associate or bachelor’s degree from a non-Maine school or received a graduate degree from a Maine school.

Estate Tax

  • For estates of decedents dying on or after January 1, 2016, the Maine exclusion has been increased from $2,000,000 to an amount equal to the federal exclusion in the year of death.  The federal exclusion has not been determined for 2016 yet, but currently it is set at $5,430,000 for 2015, and it is indexed for inflation.

Sales and Use Tax

  • The temporary sales tax rates that were scheduled to expire on June 30, 2015 were extended to December 31, 2015.
  • The legislation puts new rates into place effective January 1, 2016; however, the only rate that will change is the lodging tax.  It will go from 8% to 9%.
  • The definition of grocery staples exempt from tax has been amended to further exclude items such as: soft drinks, potato chips, granola bars, and desserts.
  • The service provider tax will go from 5% to 6% and will now include basic cable in addition to extended cable.  It will also include satellite radio.

Property Tax

The homestead exemption will be increased from its current amount of $10,000 to $15,000 for property tax years beginning on or after April 1, 2016 and $20,000 for property tax years beginning on or after April 1, 2017.

We welcome your questions and stand ready to assist in any way we can.

Very truly yours,

 

 

15 Casco Street, Portland, ME 04101-2902
Tel: 207-874-0355 Fax: 207-874-0865
www.dspbcpa.com