Federal - Maine Differences - TaxSlayer

Prepared for the 2026 Tax Season - TY2025 Tax Returns

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Be aware of the items that need special entry in the Maine section as you find them while doing the Federal section or from the interview with the taxpayer. Note that for the pension items, separate accounting is needed for Taxpayer and Spouse.

Maine Entries On Federal Menu: INCOME

Wages and Salaries

W-2s: Maine State employees and many municipal employees and teachers are covered under the Maine Public Employees Retirement System (MainePERS). When in MainePERS, an employee’s federal wages (Box 1) and state wages (Box 16) on the W-2 are different. That difference is the employee’s annual MainePERS (MSRS) retirement plan contribution reported in Box 14. Maine taxes those contributions, but they are NOT taxed on the federal return. Because the amount entered in the state wages on the W-2 is not automatically carried through to the state return unless you use the TaxSlayer drop-down menu in Box 14 of the federal W-2 entry to select the Maine code MSRS to add back those contributions. Then the Box 14 amount will be carried to Maine Schedule 1A, Income Additions on line 3. Automatic: you will not need to adjust the Maine return.

State and Local Refunds

State Income Tax Refund (Schedule 1, line 10 on the federal return): If reported on the federal return, the taxable amount is automatically subtracted by TaxSlayer on state return - Maine Schedule 1S, line 2.

Interest and Dividends

US Savings Bond and Treasury Obligations Interest (Line 3 on 1099-INT): Although taxable on the federal return, US Bond and Treasury interest is exempt from Maine tax. Using the TaxSlayer Interest or Dividend Statement, choose the US Savings + Treasury Obligations (box 3) line to enter the amount of Savings Bond or Treasury interest. Then enter the State Adjust Deduction further down on the Interest screen: “Amount of interest on U.S. Savings Bonds and Treasury Obligations that you want subtracted from your state return.” On the next line down, select “Maine” from the pull-down menu. TaxSlayer will carry this through to the Maine return and you will find it on Schedule 1S, Income Subtractions, line 1. You will not need to make any adjustments in the Maine return.

Tax-exempt (Municipal Bond) interest: Exempt from federal tax. However, in Maine only interest from those municipal bonds issued by eligible Maine entities is exempt. To make the adjustment, go to the TaxSlayer Interest or Dividend Statement. Enter the total tax exempt interest (Box 8). On the “Taxable State Interest” line, click on “Add Interest.” Indicate the amount that is taxable in your state, and choose Maine on the pull-down menu. This will carry over to Maine Schedule 1A, line 1 (Income from municipal and state bonds, other than Maine). You will not need to make any adjustments in the Maine return.

IRA/Pension Distributions

1099-R:

MainePERS adjustments and the Maine Pension Income: MainePERS 1099-R 

Taxable Amount Federal: Box 2a

Taxable in Maine: Amount in Box 16. The difference between Box 1 and Box 5 (contributions). These are not insurance premiums.

Pick-up Contribution: Subtract in Box 16 (state distribution amount, taxable) from in Box2a (federally taxable amount) and make a note on the 1099-R. This will give you the ‘Pick-up Contributions’ amount needed to complete Schedule 1 on your Maine tax return. Write this value on the 1099-R. 

After you complete the Federal section, in the Maine menu enter this in the “Subtractions from Income” page on the “Pre-taxed State Retirement System Pickup Contributions” line. It will then transfer properly to Maine Schedule 1S, line 7. NOTE that this amount also needs to be subtracted from the federally taxable figure before entering in the Maine Pension Deduction calculation, which is done under “Subtractions from Income,  Pension Income Deduction” line. It is easy to forget to do this taxable income reduction in the Maine return, so make note of it as soon as you see a MainePERS 1099-R.

Pension benefits under employee retirement plans: If a 1099-R has CODE 7 or CODE 4 (death benefit) in Box 7, the taxpayer may be eligible for the Maine $48,216 pension income deduction (increased from $30,000 last year). Regular and Roth IRAs are eligible for this deduction, including CODE 2 (early distribution with exception), as long as no penalty is incurred. A CODE 1 distribution with a penalty would not be included, but if the penalty is waived the amount is eligible for the deduction. On a joint return, both spouses are eligible if each was in a retirement plan. Only “primary recipients” are eligible; privately funded annuities are not eligible even though coded as 7 in Box 7. Company funded annuities are eligible. See instructions for the Pension Deduction in the Maine 1040 Income Tax Booklet for a description of eligible pensions.

The amount that can be deducted is reduced or eliminated by the amount of Social Security and all Railroad Retirement benefits (Tier 1 and 2) received by each individual. Only the state taxable portion of a pension, IRA or Roth is used for this deduction  calculation. Make note of this amount for entry under the Maine menu after completing the Federal section. TaxSlayer will ask you when you are entering the Maine section of the return if you want to do this. You can also add it on the “Subtractions from Income” page, on the “Pension Income Deduction” line. This will then carry to the Maine Pension Deduction Worksheet and to Schedule 1S, Line 4.

Don’t forget to do this in the Maine return, as it is easy to miss, and can be a large deduction (now > $100,000 for a couple when each has a pension). There is a new income phaseout beginning at $125,000 if single and $250,000 for married filing jointly.

NOTE: If a husband and wife both have 1099-R’s from the same company, ask if each worked for that same company or if one spouse is receiving a percentage of the other’s pension. Only the person who worked for the company is eligible for the $48,215 deduction. However, a surviving spouse is eligible for the $48,215 exclusion even if not the original worker.

Military pensions: Military pensions (United States Army, Navy, Air Force, Marines, Coast Guard or Space Force), including survivor benefits, are fully deductible in Maine. Make note of the amount to be entered on the “Pension Income Deduction” line of the “Subtractions from Income” page in the Maine section of TaxSlayer. The deduction will carry to Maine Schedule 1S, Line 4. Don’t forget this one as well in the Maine return.

Military Survivor Annuity Payments: Amounts paid to a survivor of a deceased military member as a result of service in the US armed services (active or reserve) under a survivor benefit plan are exempt from Maine tax. It is entered on the Maine return under Subtractions from Income, Military annuity payments made to a survivor of a deceased member of the military. It will carry to Maine Schedule 1S, line 6 (“Military annuity payments made to a survivor of a deceased member of the military”).

Social Security Benefits/RRB-1099

Social Security: The portion of Social Security income that is taxable on the federal return is not taxed in Maine. This subtraction is made automatically by TaxSlayer and entered on Maine Schedule 1S, line 3.

Railroad Retirement: Railroad Retirement is not taxable in Maine. The federally taxable part of the RR pension (RRB-1099-R; green) is added to the federally taxed portion of Social Security/RRB and entered on Maine Schedule 1S, line 3. Railroad Retirement is handled automatically by TaxSlayer on the Maine return.

DEDUCTIONS – Adjustments

Credits

Educational Opportunity Tax Credit (EOTC) replaces the Student Loan Repayment Tax Credit (SLRTC) for 2022 and 2023. It applies to tax years beginning on or after January 1, 2022. The SLRTC is equal to eligible education load payments plus for tax years before 2027 unused EOTC amounts carried forward from prior tax years. Up to $2,500 with a lifetime cap of $25,000.

Qualified individuals had to obtain an associate, bachelor’s, or graduate degree after 2007 from an accredited Maine or non-Maine college, are a Maine resident during the tax year, and have earned income of at least $13,244 for 2024. Eligible education payments must be paid by the qualified individual directly to the lender.

There is much more to this credit, and most preparers in our district will never have a taxpayer eligible. If there is a taxpayer eligible, either have some who fully understands the credit or send the taxpayer to someone who does.

Contributions to Education Savings 529 plans

Maine income subtraction modification for contributions to a qualified tuition program established under the Internal Revenue Code, Section 529 is reinstated.

Contributions to a qualified tuition plan, up to $1,000, for each designated beneficiary.

May not be claimed by taxpayers whose federal adjusted gross income exceeds approximately $100,000 if filing single or married filing separately; or $200,000 if married filing jointly or head of household.

Child Care Tax Credit: This credit is equal to 25% of the federal credit for child and dependent care expenses. The credit doubles if the expenses are related to a quality (Step 4) child care provider, and is refundable up to $500. Regular child care is credited automatically by TaxSlayer. For Quality Child Care, make note of the  amount, then enter it in the State menu on the “Credits” page, “Child Care Credit” line, which will say “Refundable Child Care Credit.” You will need the Quality Child Care Program Name, certificate number, and expenses paid.

Adult Dependent Care Credit: Eligible taxpayers may claim a tax credit equal to 25% of the applicable percentage of adult dependent care expenses paid for adult day care, hospice services and respite care during the taxable year to the extent the expenses are not used to calculate the federal child and dependent care credit. The expenses that may be used to calculate the credit are limited to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals and the applicable percentage is the percentage used to calculate the federal child and dependent care credit. The credit is refundable up to $500. Enter it in the State menu on the “credits” page, “Adult Dependent Care Credit” line, where it will ask for the qualifying individual and expenses paid.

Credit for Income Tax paid to another state for Maine residents with another state indicated on a W-2, W-2G. Enter state code as shown on W-2. Prepare return for other state (nonresident or part-year resident) as necessary using the STAP program. TaxSlayer will assign withholding to the appropriate state and automatically give appropriate credit on the Maine Schedule A line 12.

Earned Income Tax Credit: The Maine earned income credit is 25% of the federal earned income tax credit in TY2025, and is 50% for eligible individuals who do not have a qualifying child. This is a refundable credit for Maine residents. TaxSlayer automatically enters this on Maine Schedule A, line 3.

Property Tax Fairness Credit/Sales Tax Fairness Credit (Schedule PTFC/STFC): Client(s) must be a Maine resident or part-year resident for these credits. No credit if filling status is married filing separately. Maine total income limits for these credits include federal total income, plus all tax-exempt income including social security, SSI, SSDI, tax-exempt interest, and any loss add-backs (negative amounts (net loss)) shown on federal Form 1040 or Form 1040-SR, line 7 and federal Schedule 1, lines 3, 4, 5, 6, and 8. You must choose Credits and then the Property Tax Credit -Schedule PTFC screen under the Maine menu to complete the needed information. A portion of rent paid is attributable to property tax, so that some renters qualify for this credit as well. Note that people who pay both rent and property tax (typically in trailer parks) can use both amounts in calculating their credit. The PTFC will appear on 1040ME line 25d. 

If the taxpayer or spouse, if married, are a veteran of the United States Armed Forces who is rated 100% permanently and totally disabled as a result of one or more service-connected disabilities by the United States Department of Veterans Affairs, they are eligible for a refundable property tax fairness credit up to $2,000 ($4,000 if 65 years of age or older).

The PTFC is only calculated for property tax actually paid in 2025, not billed. For towns where payments are made every 6 months, you will need both 2025 and 2026 property tax bills. Often, only the most recent bill is included in the taxpayers paperwork. Most towns have property tax bills online, and the bill can be easily located. Otherwise, the taxpayer will need to return with the additional bill, call the town office, or provide other information on property tax paid during the year.

Payments could include the second half payment for 2025 and both halves of the 2026 bill paid during the fall of 2025 (three halves), as long as all were made in 2025. However, the next year would have a much lower property tax credit. Only include property tax for the house and house lot up to 10 acres. If the lot size is greater than 10 acres, the taxpayer will need to call their town office or assessor to get the tax on the house and land up to 10 acres. Tax can only be included for the house and lot that the client lived in during 2025, not for additional properties that are owned. Don’t forget this one in the Maine return, for both property tax and rent. This is a refundable credit up to $1,000 ($2,000 if 65 years of age or older). The maximum property tax considered is now $4100 for anyone 65 or over, so incomes up to $102,500 may get some credit. The state estimates that twice as many people are now eligible for the credit compared to 2019 (now about 110,00 tax filers), and about $111 million will be credited, compared to $27.5 million in 2019.

Sales Tax Fairness Credit is properly handled by TaxSlayer and automatically calculated, as it is based on total income, tax filing status, and number of exemptions. It will appear on 1040ME, Page 2, under Tax Payments, line 25e. Total income limits for 2025 are $32,950 single; $51,700 Head of Household; $63,950 Married filing Jointly or Qualifying Widower. Married Filing Separately does not qualify. It is a refundable credit up to $280.

PAYMENTS & ESTIMATES

Maine Estimated Taxes paid in 2025 are recorded in the Payments & Estimates section of the Federal menu. State tax owed on 2024 return and paid in 2025 can be deducted on federal itemized deductions. Enter this under Payments & Estimates on the “Other State Withholdings” line.

OTHER MAINE ITEMS

Use Tax (Sales Tax): must be paid on income tax return for purchases without sales tax, typically from internet or mail order or other states that do not have sales tax. Previously we included this in many returns (prior to 2019), but in recent years most internet and other out of state vendors charge Maine sales tax. Unless the client has a specific item purchased out of state without Maine sales tax, this can be left blank. The Maine 2025 tax rate of 5.5% is used to calculate any tax.

Charitable Contributions and Purchase Park Pass: Enter on the designated page in State menu in TaxSlayer. The charitable contributions can be included as a deduction on next year’s federal and state tax return if itemizing deductions.

Miscellaneous Forms in the Maine State Menu gives access to:

Estimated Payment Vouchers - Form 1040ES-ME is found here and we often have to use it.

Form 2210ME Underpayment of Estimated Tax – Don’t do this, we let Maine calculate any penalty.

Claim Refund of Deceased Taxpayer – To file form 1310ME.

Extension Payment Voucher – Use only if filing for an extension, which is not recommended.

Part-year Residents must apportion what income was received after moving to Maine, including taxable social security, investments, etc., from what is indicated on these respective forms. They are not taxed in Maine on income received prior to becoming Maine residents. Presuming Maine starts out as the resident state on the return because that's where he/she lives now at the end of 2025: After doing the federal, we used to add the other state as part-year resident and complete that state’s return. Now other state returns are out of scope. The STAP program is to be used to complete the other state or states. Then at the end you will find the listing as one part-year state and Maine as resident state. Click on CHANGE for Maine and change to part-year. Then fill in all the info for Maine on the State menu.

You will have to be figuring what gets added and subtracted from each state as you go along. TaxSlayer will generate in the PRINT option the comparison of the two states. This gets tricky and we don’t do many, so be careful.

Last updated: 1/8/2026 MBD