SAVING ON MAINE TAXES
Maine Wild Blueberry Pie. Click here for a great recipe:
REVISED AND UPDATED AS OF 2/5/2015
Are you feeling blue because high taxes here in Maine have got you down? Here is some free advice from a CPA and an MBA with 20 years of experience on how to legally cut the taxes you pay to Maine. The money you save goes in your pocket. Why not give yourself a raise? If you don’t take care of your own money do you think others will?
Taxed To Death (Literally)
Let’s say you’re in business for yourself. One day you realize your business needs a backhoe. This backhoe is a piece of equipment your business requires in order to function, survive, and help you make an honest living by working. But before you buy the backhoe you first have to earn the income to pay for it or to pay the loan payments to finance it. Your income is taxed here in Maine up to 7.95% (for years after 2012).
After you earn the income to buy or finance the backhoe you go off and actually get it. Now you pay a 5.5% Maine sales tax (up from 5% as of October, 2013.)
And then you start using the backhoe in your business. Your town or city will assess the backhoe for personal property taxes at the local mill rate. You will pay again for merely owning the backhoe on which income and sales taxes have been paid.
Finally, when the owner of the business dies the backhoe will be included in his taxable estate, subject to death tax at the applicable rate. Maine’s death taxes go as high as 12%.
Thus, one piece of business equipment is subject to (at least) four different taxes here in Maine. Of course you also pay many federal taxes in addition.
Maine is consistently ranked one of the highest taxed states in the country. In 2014, for the fourth year in a row, Fortune business magazine ranked Maine one of the worst states in which to do business.
There is only one way to deal with this harsh, tough, difficult situation: GET SMART.
Ways To Save Legally
Here I make use of my twenty years of experience as an accountant by listing all the major ways Mainers can legally cut their taxes. I’ve organized these tax saving opportunities by type of tax and included links to forms, further guidance and related information. Everything is presented in a logical and easy to use format. I’ve made it very easy for you to save money.
Act on these opportunities. Get busy. Stop wasting your hard earned money away unnecessarily. If you don’t take advantage of these ways to save money you can be sure no one else will do it for you.
(1) Cutting Maine Income Taxes
(A) The Pension Income Deduction
I’ve seen many taxpayers and their accountants overlook the $10,000 (for 2014) Maine deduction allowed for pensions. If you are not currently receiving Social Security you may be entitled to a $10,000 Maine deduction. If your Social Security income is under $10,000 you may still qualify for a partial deduction. And if you receive a military pension you will get a $10,000 Maine deduction regardless of how much Social Security income you collected.
For 2014 fill out Schedule 1, Line 2d and the supporting Worksheet. Click here for more information:
(B) Important and Frequently Overlooked Maine Tax Benefits
Enhanced Babysitter Tax Credit: Maine offers a larger tax credit for child care provided by a “Quality” certified program. Up to $500 of this Maine credit is refundable, which means if you owe zero Maine tax you will still get a refund from this credit. See:
Deduction for Long Term Care Premiums: If you’re paying long term care premiums Maine offers a special deduction claimed on Schedule 1, Line 2f. See:
(C) MPERS Deduction
Maine taxes contributions to the Maine Public Employees Retirement System. When public employees retire the portion of their pensions that are subject to federal tax may differ from the portion that is subject to Maine tax. If the federal taxable portion is higher than the Maine taxable portion this means a Maine deduction is allowed. Don’t get double-taxed on your state pension! Make sure this Maine deduction is properly claimed. I’ve seen far too many accountants miss this.
The deduction is claimed for 2014 on Schedule 1, Line 2g.
(D) Are You Really a Maine Resident?
Many of my clients consider moving to Florida or other states where taxes are lower and temperatures are higher. Other clients divide their time between Maine and other states. Maine evaluates many factors in determining whether you are a Maine resident. See Worksheet A which lists these factors. See:
The advantage of being a part-year resident of Maine is that income sourced out of Maine will escape Maine taxes. This can result in substantial tax savings. If you spend 6 months or more out of Maine you may qualify as either a non-resident or part year resident of Maine. Use Schedule NR and related schedule B to apportion your income between Maine and elsewhere.
(E) New Maine Businesses
If you are starting up a new Maine business and plan to hire employees and pay wages at or above qualifying levels you may receive up to a ten year exemption from ALL Maine taxes under the Pine Tree Development Zone Program. Click here for further information:
(F) Maine Opportunity Credit
If you attended college in Maine, graduated, and then stayed in Maine and worked at a job you may qualify for this credit, which is intended to encourage the best and the brightest to remain in the state that educated them. (For the current version of this form call Maine Revenue Services at 624-7894). See:
(2) Cutting Maine Sales Taxes
(A) Sales Tax Exemptions
There are many, many exemptions from Maine sales tax based on either what is being sold or who is buying it. Here is a list of sales tax exemptions and further information:
One general exemption is that if you buy goods for resale you do not have to pay sales tax on the purchase. Instead, as a reseller, you must collect sales tax from your customer and then remit it to the state as escrow funds. Many organizations are specifically exempt from sales tax.
Here is the list:
(B) Heating Oil
Heating oil used for residential purposes is exempt from sales tax. One common error I’ve seen is when landlords have mixed use property, i.e., an office or business uses part of the building and apartments comprise the remainder. If one oil tank is used for the entire building then the landlord should prorate usage of the heating oil between residential (which is exempt) and non-residential use (which is taxable.)
In several cases I’ve helped landlords file refund claims with Maine for overpaid sales tax on the residential use of heating oil. These claims can be made for the statutory period allowed for Maine refunds (usually three years.)
(3) An Overlooked and Under-Used Rebate Program
Maine has once again changed its Property Tax Fairness Credit for 2014. You may qualify for a $600 tax credit ($900 if age 65 or older) if you qualify.
This credit is refundable which means that even if you owe no Maine tax you will still get a refund. See:
(4) Cutting Property Taxes
There are many ways to reduce property taxes levied on real estate and personal property. Here are some of the most important:
(A) The Business Equipment Tax Reimbursement (BETR) Program
The idea of this Maine program is simple: reduce the burden of personal property taxes assessed on many types of business equipment. The process starts with calling your local town assessor and requesting Form 801 from him or her. Many assessors can provide a “Form 801 Substitute.” Then, file this Form 801 along with Form 800 with the State of Maine requesting reimbursement of taxes paid on qualifying business equipment.
Click here for more information:
(B) Property Tax Exemptions
Veterans, some family members of veterans and the blind may qualify for partial or complete exemption from property taxes.
Click here for forms:
Family Members of Veterans:
(C) Homestead Exemption
Maine residents may qualify for the $10,000 homestead exemption for the municipality where they live.
Click here for the form:
(D) Charitable Organizations
I have many charitable and benevolent organizations as clients. Over and over again I’ve seen these nonprofit groups fail to take advantage of Maine’s property tax exemption allowed under Section 652 Subsection 1. Your non-profit organization may qualify for a full or partial exemption depending on how your property is used. Contact your local assessor and file an abatement claim with him or her.
(E) The Last Resort: File for Abatement
Even if you don’t qualify for other exemptions consider the possibility that your local town assessor over-valued your property. This is especially relevant after the recent crash in real estate values.
(5) Beating the Car Tax
Every Mainer hates the car tax, which can amount to hundreds of dollars a year or more.
There are two ways to cut this tax. First, buy a car that is six years old or older in order to pay the minimum tax.
Second, religious, charitable and certain other groups qualify for a complete exemption from the car tax. Click here for a list of all car tax exemptions:
Click here for general information on the car tax:
Certified Public Accountant Master of Business Administration
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