Our nation’s veterans earned our respect through a career of public service and sacrifice. As a result, Governor Paul R. LePage strives to turn Maine into an attractive destination for both current and future military retirees. Earlier this year, the governor proposed a comprehensive two-year budget that contained a number of significant tax reform proposals. While many of the governor’s proposals, including dramatically reducing Maine’s income tax, were rejected by the Maine Legislature, the LePage Administration successfully secured the passage of a number of provisions that benefit Maine veterans. These provisions included eliminating the tax on military pensions, reducing the burden of Maine’s “death tax” on families, and doubling the value of Maine’s homestead exemption.
Elimination of the tax on military pensions: In the past, military retirement pension payments were subject to the $10,000 pension exemption available to all Maine taxpayers. Now, military pension benefits, including survivor benefits, will be fully exempt, from state income tax as of on January 1st, 2016. With this paramount reform, Maine now joins 22 other states that honor their veterans by not taxing their pensions. Veterans with civilian employee retirement plan benefits may continue to utilize the $10,000 pension exemption for qualifying plans. Military retirees and their survivors who receive military pension benefits as a result of service in the active or reserve components of the Army, Navy, Air Force, Marines or Coast Guard will be eligible to claim this exemption. This elimination of the tax of military pensions means there will be no cap involved, military pensions will be fully exempt. It’s important to note that in order to be exempt from the State of Maine’s income tax, military pension payments must be made by the federal Defense Finance and Accounting Service. Military pension benefits rolled over into civilian retirement plans are eligible for only the $10,000 exemption.
Reducing the burden of Maine’s “death tax” on families: Beginning January 1st, 2016, the State of Maine’s state tax will conform with federal estate tax exclusion amount. This crucial change protects our veterans and their property. Maine’s veterans can rest assured that their own businesses and the property will be passed on to the next generation instead of being sold off to pay a burdensome tax bill.
Doubling the value of Maine’s homestead exemption: Starting this year 2016, the homestead exemption will increase to $15,000. In 2017, the homestead exemption will double from its current amount, protecting Mainers and veterans from local property tax increases by exempting the first $20,000 of their home’s value from taxation.