Maine allows a pension income deduction for certain retirement benefits that are included in your federal adjusted gross income (AGI). This deduction can reduce or eliminate the amount of retirement income subject to Maine income tax.
For tax year 2026 returns filed in 2027, eligible taxpayers may deduct up to $49,824 of qualifying pension income. The deduction is calculated separately for each taxpayer on a joint return.
What Retirement Income Qualifies for the Maine Pension Income Deduction?
Generally, qualifying retirement income includes:
- Pension payments reported on Form 1099-R
- Certain annuity income
- Distributions from eligible retirement plans included in federal adjusted gross income (AGI)
- Benefits received from qualified employer retirement plans and individual retirement arrangements (IRAs) that qualify under Maine law
Beginning with tax years starting on or after January 1, 2025, distributions received before age 55 generally do not qualify for the pension income deduction unless they are part of a series of substantially equal periodic payments made over the life expectancy of the recipient or the joint life expectancy of the recipient and a designated beneficiary.
What Retirement Income Does Not Qualify?
The following types of income do not qualify for the Maine pension income deduction:
- Social Security benefits (SSA)
- Railroad Retirement benefits (RRB)
- Roth IRA conversion amounts
- Refunds of excess contributions
- Distributions from ineligible deferred compensation plans
- Disability benefits reported as wages
- Certain early distributions received before age 55 that do not meet the exception described above
How Does the Pension Income Deduction Work?
For tax year 2026, the maximum pension income deduction is $49,824 per taxpayer. However, the deduction must be reduced by the total Social Security benefits and Railroad Retirement benefits received during the year, whether those benefits are taxable or nontaxable.
In addition, the pension income deduction may be reduced for taxpayers with higher federal adjusted gross income due to Maine's income-based phaseout rules. Taxpayers whose federal AGI exceeds the applicable threshold may be eligible for a reduced deduction.
How Do I Enter the Pension Income Deduction?
In the Maine return, navigate to:
- Maine
- Subtractions from Income
- Pension Income Deduction
Enter the total amount of eligible pension income for each taxpayer in the field labeled:
Taxpayer/Spouse - Total Eligible Pensions Other Than SSA/RRB
Do not include:
- Social Security benefits (SSA)
- Railroad Retirement benefits (RRB)
- Retirement income that does not qualify for the Maine pension income deduction
Important Notes
- The pension income deduction is calculated separately for each taxpayer on a joint return.
- Social Security and Railroad Retirement benefits reduce the amount of pension income deduction that may be claimed.
- Taxpayers with higher federal AGI may receive a reduced deduction because of the income-based phaseout rules.
- Retirement income must be included in federal adjusted gross income before it can qualify for the Maine pension income deduction.