Maine Governor Paul LePage isn’t feeling the love lately.  On June 26, the Maine Legislature overrode the Governor’s veto and avoided a possible government shutdown.  Here are a few of those changes that affect the state’s income tax:

  • Conformity with the Federal tax code was updated to January 2, 2013, for tax years beginning on or after January 1, 2013 (previous date was December 31, 2011) except for bonus depreciation deductions for taxable years beginning in 2013 and the larger federal standard deduction for joint filers permanently enacted as part of the federal American Taxpayer Relief Act of 2012 for income tax years beginning in 2013.
  • Capital investment credit extended for taxable years beginning in 2013 (for taxpayers that claim a federal bonus depreciation deduction for property placed in service in Maine in 2013).
  • Inflation adjustment for Maine personal income tax brackets suspended for tax years beginning in 2014 and 2015 (plus, inflation adjustment calculation for tax years beginning after 2015 now based on the Chained Consumer Price Index instead of the Consumer Price Index).
  • Itemized deductions capped at $27,500 (adjusted annually for inflation).
  • Refundable “property tax fairness credit” allowed against Maine personal income taxes (replaces Circuit Breaker program).

Certain sales tax provisions were also enacted:

  • temporary rate increases apply from October 1, 2013, to June 30, 2015, for the state sales tax (from 5% to 5.5%), hotel room tax (from 7% to 8%), tax on prepared food (from 7% to 8%), and tax on liquor sold in licensed establishments (from 7% to 8%).
  • Sales tax now applies to “products transferred electronically” (i.e., a digital product transferred to the purchaser electronically, the sale of which in non-digital physical form would be subject to Maine sales tax as a sale of tangible personal property).
  • Effective October 1, 2013, publications regularly issued at average intervals not exceeding three months will also be subject to sales tax.

For more information contact your MHCo tax professional at 800.282.2440 or email us