What's new in 2025 for Maine?

Maine has made the following changes to the 2025 Tax Year

Lincoln Mill Facilities District bond interest

• Certain bonds issued by the Lincoln Mill Facilities District are, together with interest on and income from the bonds, exempt from all taxes, including the Maine income tax. Effective April 16, 2024.

Pension income deduction

• For tax years beginning on or after January 1, 2025, the pension income deduction is subject to phaseout for taxpayers whose federal adjusted gross income is more than $125,000 for single individuals or married individuals filing separate returns; $187,500 for individuals filing as heads of households; and $250,000 for individuals filing married joint returns or as surviving spouses. For tax years beginning after 2025, the phaseout threshold amounts are adjusted for inflation.

United States Space Force

• The law is amended to include the Space Force as an active or reserve component of the United States Armed Forces for purposes of the Maine pension income deduction and the income subtraction modifications for annuity payments made to the survivor of a deceased member of the military and non-Maine active duty military pay. 

Installment sale election

• Beginning in tax year 2024, the law provides that interest associated with an installment sale of property for which the election is made by a nonresident individual taxpayer to pay the Maine tax on the gain in the year of the sale or in a subsequent tax year is excluded from Maine taxable income in the year of the election and any subsequent tax year.

Credit for certain homestead modifications

• Beginning in tax year 2024, the credit for certain homestead modifications is repealed except that unused credit amounts may be utilized to the fullest extent allowed by the carryforward provisions for the credit.

Dependent exemption tax credit

• The dependent exemption tax credit is refundable (up to $305 per qualifying child/dependent at least six years of age or $610 per qualifying child/dependent under six years of age) and for tax years beginning after 2024, the credit is adjusted for inflation. The credit is subject to phaseout. Additionally, the phaseout of the dependent exemption tax credit is changed to $20 for each $500 (previously $7.50 for each $1,000), or fraction thereof, by which a taxpayer’s Maine adjusted gross income exceeds $100,000 for single individuals; $125,000 for individuals filing as heads of households; $150,000 for individuals filing married joint returns or as surviving spouses; or, $75,000 for married individuals filing a separate return. For tax years beginning after 2025, the income phaseout thresholds are adjusted for inflation.

Estimated Tax Penalty-Underpayment for the 4th installment

• As of September 24,2025, for individual income tax, the penalty for underpayment of estimated tax may not be imposed with respect to the 4th required annual installment if the tax is paid in full by the last day of the first month of the following taxable year. 

Property Tax Fairness Credit

• Beginning in tax year 2024, the property tax fairness credit is increased for individuals 65 years of age or older by 1) increasing the maximum benefit base to $4,000, regardless of the individual's filing status and number of qualifying children and other dependents, and 2) increasing the maximum benefit from $1,500 to $2,000.

You may qualify for the refundable Property Tax Fairness Credit up to $1,000 ($2,000 if you are 65 years of age or older)* if you meet all of the following: 

1. You were a Maine resident during any part of the tax year; • You owned or rented a home in Maine during any part of the tax year and lived in that home as your principal residence during the year; 
2. Your total income during 2025 was less than the amount shown in the table below for your filing status and the number of qualifying children and dependents on Form 1040ME, line 13a (OR, less than $102,500 if you are 65 years of age or older).

**If your filing status is Married Filing Separately, you are not eligible to take this credit.

Additional Information

• The law is amended to clarify that certain returns of information are required to be filed by persons making payment or crediting in a calendar year the amounts of $600 or more, or $10 or more in the case of interest or dividends, to a person who may be subject to Maine income taxes. Failure to file such returns, or filing a false or fraudulent return, may result in a penalty of $50 for each such failure.
  Generally, returns of information include Forms W-2, Forms 1099, and other similar forms containing tax information necessary for filing Maine income tax returns.

For more details, click here.

1040ME General Instructions