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Anne Powelson Anne Powelson
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Changes in store for Maine

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Fall is in the air, leaves are starting to change color. Change is on tap for Maine taxes too. These changes are all scheduled to affect your 2014 taxes (which begin filing in January 2015.)

Larger pension deduction. Good news for retirees: the pension deduction will increase from $6,000 to $10,000. This will continue to be decreased by taxable or non-taxable Social Security income received for all but military pensions. However, the list of qualifying pensions eligible for the deduction grows to add non-penalty distributions from IRA's, SIMPLE plans and retirement annuities to the prior list of 401(k) distributions, state, federal and company pensions. Early distributions from plans which are subject to a federal penalty are not eligible, nor are state pension amounts already exempted as 'pick-up contributions.'

Growth in the itemization cap.On 2013 Maine taxes, a cap was first placed on itemized deductions. Two revisions will be made to that cap this year. First: there will be no limit on medical deductions allowed. Second: charitable contributions, allowable on the federal return, may exceed the $27,500 cap by up to $18,000.

Maine military pay.Maine residents in the military assigned to active duty outside of Maine may subtract from Maine income tax the federally taxable portion of that salary.

Property Tax Fairness Credit. Almost every element of the Property Tax Fairness Credit will be changing:

The maximum credit allowed grows to $600; $900 for those over 65.

The income used for the calculation changes. In 2013, Maine Adjusted Gross income was used; now the income used will be total federal income plus nontaxable social security and railroad benefits, tax-exempt income and certain business and capital losses.

The amount of property tax (or rent considered to be property tax) changes as well. On 2013 taxes, it was 40 percent of the tax bill which exceeded 10 percent of Maine Adjusted Gross Income. In 2014, it will be 50 percent of the property tax bill which exceeds 6 percent of the new income definition, subject to the maximums shown below.

The portion of rent considered to go for property tax decreases. Previously, 25 percent of rent was considered to go for property taxes; in the future, 15 percent will be considered to be going for property taxes. However, those with subsidized rent will no longer be automatically excluded.

The maximum income eligible to claim the credit and maximum property tax used in calculations vary by filing status and exemption, as shown below:

Max Income Max RE Taxes Used Family Size

$33,333 $2,000 Single filers

$43,333 $2,600 Joint or Head of Household (HoH), two exemptions

$53,333 $3,200 Joint or HoH, three or more exemptions

$21,667 $1,300 Married Filing Separate (MFS), two or less exemptions

$26,667 $1,600 MFS, three or more exemptions

There are many changes to keep track of this year; I'll be covering some of the bigger federal changes over the next few months. Using a tax professional assures you won't miss out on any changes.

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