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Maine Taxes: What You Need to Know

Federal, State, and Local Tax Withholding in Maine in 2024

Federal Income Tax:

Maine residents are subject to federal income tax, just like all other U.S. citizens. The federal tax is calculated based on a progressive tax system with varying rates depending on income brackets, meaning that individuals pay higher rates on higher income. For the 2024 tax year, the federal tax brackets are as follows:

• 10%: This rate applies to taxable income up to $11,000 for single filers.
• 12% to 24%: Tax rates increase incrementally based on income, with intermediate rates including 12%, 22%, and 24%, covering different portions of taxable income.
• 37%: The top rate of 37% applies to taxable income over $578,125 for single filers and $693,750 for married couples filing jointly.

The progressive nature of these rates means that as income increases, additional earnings are taxed at higher rates. These rates apply nationwide and are adjusted annually to account for inflation, making them dynamic and responsive to economic conditions. This system ensures that tax liability grows proportionally with increased earnings while still maintaining basic thresholds for lower-income households. (Source) 

Maine State Income Tax:

Maine imposes its own progressive state income tax across three income brackets:

1. 5.80%: Applicable to taxable income up to $26,050 for single filers and $52,100 for married couples filing jointly. This bracket aims to provide a lower tax burden for those with modest earnings.
2. 6.75%: Applies to taxable income between $26,050  and $61,600 for single filers, and between $52,100 and $123,250 for joint filers. This middle bracket captures a wide range of middle-income residents.
3. 7.15%: This rate is levied on income over $61,600 for single filers and over $123,250 for married couples filing jointly.

Maine’s progressive system ensures that individuals with higher earnings pay a larger share of their income in taxes compared to those with lower incomes, which helps distribute the tax burden more evenly. (Source) 

Maine also allows certain deductions and credits, such as the Property Tax Fairness Credit and the Earned Income Tax Credit (EITC), which can significantly reduce tax liability for eligible residents. These deductions are designed to make taxes more equitable, especially for low and moderate-income earners.(Source)  (Source)  (Source). 

Local Taxes in Maine:

Maine does not impose local income taxes, which simplifies income tax filings for residents. However, local municipalities do levy property taxes and sales taxes, which contribute significantly to the state’s revenue system.

• Property Taxes: The average effective property tax rate in Maine is approximately 1.30% of assessed property value, which is slightly above the national average. Property tax rates in Maine vary considerably between municipalities, with urban areas and areas closer to the coast often experiencing higher rates compared to rural parts of the state. (Source)

• Sales Taxes: Maine imposes a statewide sales tax rate of 5.5% on most goods and services, which is among the lower rates in the region. Unlike some states, Maine does not have additional local sales tax, meaning the rate remains consistent statewide. Certain essential goods, such as groceries, are exempt from sales tax, while specific items like prepared food, car rentals, and lodging may be subject to higher rates, often around 8%.

These tax structures—property and sales—play a crucial role in supporting local government services, such as public schools, infrastructure, and emergency services.(Source) 

FICA and State Insurance Taxes in Maine in 2024

FICA Taxes include Social Security and Medicare:

• Social Security is taxed at 6.2% on income up to $168,600 in 2024.
• Medicare is taxed at 1.45% on all income, with an additional 0.9% surtax on earnings over $200,000 for single filers. (Source)

Maine employers and employees both contribute to Unemployment Insurance (UI), which supports residents in case of job loss. (Source) 

Pre-Tax Deductions in Maine in 2024

Pre-tax deductions play a crucial role in reducing your taxable income, thereby lowering your overall tax liability. These deductions are taken from your gross income before any taxes are applied, which ultimately reduces the amount of income subject to taxation. Here’s a detailed breakdown of common pre-tax deductions that Maine residents can utilize:

Health Insurance Premiums

Employee contributions toward medical, dental, and vision insurance are generally deducted from wages on a pre-tax basis. This means that the amounts contributed for these health insurance plans are not included in taxable income, effectively reducing the employee’s federal, state, and FICA tax liability. This can translate into significant tax savings, especially for employees with comprehensive coverage.

401(k) Contributions

Contributions to 401(k) retirement accounts are also pre-tax. These contributions help workers save for retirement while simultaneously reducing their taxable income. For 2024, the contribution limit is $23,000, with an additional $7,500 catch-up contribution allowed for individuals aged 50 and older. This means that those who are nearing retirement can put away more money tax-free, allowing for better retirement savings without the immediate tax burden.

(Source) 

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA)

• Health Savings Accounts (HSAs) are available to individuals enrolled in high-deductible health plans (HDHPs). Contributions to an HSA are pre-tax, and they can be used to pay for qualified medical expenses. For 2024, the HSA contribution limit is $4,150 for individuals and $8,300 for families. HSAs have the added benefit of allowing funds to roll over year to year.
• Flexible Spending Accounts (FSAs) allow employees to contribute pre-tax dollars for medical and dependent care expenses. The FSA contribution limit for 2024 is $3,050. Unlike HSAs, FSAs generally have stricter rules regarding fund rollover, making it crucial to plan annual expenses carefully.

(Source) 

Tax Rate Summary Table

These pre-tax deductions and corresponding tax rates provide significant opportunities for Maine residents to manage their tax liabilities effectively while planning for the future—whether it involves health, commuting costs, or retirement savings.

Understanding these deductions can help individuals maximize their take-home pay and benefit from tax-advantaged savings strategies.

Median Household Income in Maine (2024)

The median household income in Maine has seen consistent growth, reflecting the state’s improving economic conditions. For 2023, the median household income is estimated at $73,733, slightly below the national average but steadily increasing.

(Source) 

Income disparities are evident between rural and urban areas, with Portland and other coastal regions often enjoying higher income levels compared to inland areas.

Maine Tax Brackets 2024

Maine uses a progressive income tax structure to ensure that taxpayers contribute based on their income level, helping to balance the financial load across different income groups. This means that higher earners pay a higher tax rate, while lower earners benefit from lower rates, which makes the overall system more equitable and ensures that essential services can be funded without placing undue strain on those with modest earnings.

For the 2024 tax year, Maine’s income tax rates are divided into three brackets:

For Single Filers:

1. 5.80%: Applies to taxable income up to $25,000.
2. 6.75%: Applies to taxable income between $25,001 and $58,000.
3. 7.15%: Applies to taxable income over $58,001.

These rates ensure that those with lower earnings remain in a tax bracket that minimizes their contribution, while those with incomes exceeding $58,001 move into the highest bracket, thereby contributing more.

For Married Couples Filing Jointly: The tax brackets for married couples are essentially doubled to account for two incomes, making it advantageous for joint filers at lower income levels:

1. 5.80%: Applies to taxable income up to $50,000.
2. 6.75%: Applies to taxable income between $50,001 and $116,000.
3. 7.15%: Applies to taxable income over $116,001.

This structure is particularly beneficial for couples with combined income that places them within the lower thresholds, as it allows them to leverage the lower rate over a larger income base before moving into higher tax brackets. The graduated increase helps distribute tax liability more equitably between different socioeconomic levels.

The progressive nature of Maine’s tax system ensures that people contribute according to their capacity to pay, which helps fund public services like education, healthcare, and infrastructure while supporting lower-income earners.

The design of these tax brackets reflects Maine’s broader tax policy goals—to raise necessary state revenue in a fair manner while ensuring essential services are maintained and available to all residents. The information provided here is based on details from the Maine Department of Revenue Services and federal tax guidelines.