Credits and breaks for Maine families: the dependent credit, the 25% EITC, child care, rent and the 529 cliff

For a Maine family with children, the state return is mostly about credits, and the credits are mostly refundable. A household that owes no Maine tax at all can still collect the dependent exemption tax credit, the Maine earned income credit, the refundable part of the child care credit, and the property tax fairness credit, which counts 15% of rent as property tax. The catch is that none of them arrive without a return and the right schedule: the dependent credit and child care credit flow through Schedule A, the EITC through Schedule A as well, and the rent credit through Schedule PTFC/STFC. On the deduction side Maine is thinner. The standard deduction is $23,550 for head of household and $31,400 joint for 2026, the $5,300 personal exemption covers the parents and nobody else, and the 529 subtraction of $1,000 per beneficiary disappears entirely at $200,001 of federal AGI.

No dependent exemption: the credit that replaced it

Maine’s personal exemption is $5,300 for the taxpayer and $5,300 for a spouse, period. Children and other dependents get the dependent exemption tax credit under 36 M.R.S. § 5219-SS, claimed on Schedule A, line 1, for each dependent for whom you claimed the federal child tax credit or the credit for other dependents. For 2025 the credit is $305 per qualifying child or dependent age 6 or older at any time during the year and $610 for a child under 6 at year end; the amounts are indexed and the 2026 figures are to come. The credit is refundable for residents and part-year residents. A $305 credit is worth more than a $5,300 exemption would have been at 5.8%, which is $307, for a family with tax to offset, and a great deal more for a family with none.

The credit phases down above $100,000 of Maine AGI single, $125,000 head of household, $150,000 joint and $75,000 married filing separately: $20 comes off for each $500, or part of $500, over the line. A joint filer at $160,000 loses $400, which wipes out one child’s credit; at $165,250 with two children over 6 the $610 is gone. The Department’s credit page still shows the older $200,000 / $400,000 thresholds and a $300 amount; the 2025 worksheet governs, and the 2026 worksheet should be checked when it issues (verify).

The Maine earned income credit

Maine pays 25% of the federal earned income credit, or 50% for a worker with no qualifying children, and the credit is refundable for residents and part-year residents. Two groups the federal credit leaves out are in: filers who use an ITIN rather than a Social Security number, and childless workers who are 18 or older with no upper age limit, provided they otherwise meet the federal rules. Both groups compute what the federal credit would have been and take Maine’s share of it. Nonresidents may use the credit only to bring Maine tax to zero.

Because the Maine credit is a percentage of the federal one, every federal rule carries over: the earned income and AGI limits, the investment income cap, the qualifying child tests, and the tie-breaker rules for separated parents. Who claims the child federally claims the child in Maine.

The child care credit

Maine’s child care credit on Schedule A, line 2, is 25% of the federal child and dependent care credit from Schedule 3 of the 1040, and 50% of the portion of that credit attributable to care at a provider with a Star 5 quality rating from the Department of Health and Human Services. The worksheet splits the expenses between the two kinds of provider and applies the two rates. The credit is refundable up to $500; anything above $500 is nonrefundable and can only reduce tax. Because the federal credit is 20% to 35% of up to $3,000 of expenses for one child or $6,000 for two, the Maine credit runs from about $150 to $525 at the regular rate and double that for Star 5 care. Ask the provider for its quality certificate.

The property tax fairness credit for renters and owners

The property tax fairness credit on Schedule PTFC/STFC is a family credit as much as a senior one, because renters qualify and the income limits are set by filing status and number of dependents. For 2025 the total income limits were $63,750 single, $82,500 head of household or joint with no more than one dependent, and $101,250 with more than one. The credit refunds property tax, or 15% of rent, above 4% of total income, up to $1,500 for 2026, raised from $1,000 ($2,000 at 65 or older), limited to a “benefit base” of $2,550 single, $3,300 head of household or joint with up to one dependent, and $4,050 with more than one (2025 figures; 2026 to come). Rent only counts if it exceeds 26.67% of total income, which is the rent equivalent of the 4% property tax test. If heat and utilities are included in the rent and you cannot separate them, 15% of the rent is removed first. Married couples filing separately cannot claim it.

The sales tax fairness credit sits on the same schedule and is paid from a table by income and dependents: for 2025, up to $280 for a joint return with two or more dependents at total income up to $50,950, shrinking to zero at $63,950 (2025 table; 2026 to come). It needs no receipts. Most families who qualify for the Maine EITC also qualify for this.

Education: 529 contributions, and the student loan credit

Maine lets you subtract up to $1,000 per beneficiary of contributions to any state’s 529 plan on Schedule 1S, line 8, if federal AGI is $100,000 or less single or married filing separately, or $200,000 or less joint, head of household or surviving spouse. That is a cliff: at $200,001 of AGI the subtraction is zero. Maine’s own plan is NextGen 529, but the subtraction does not require it. Grandparents who contribute to a grandchild’s account take the subtraction on their own return. Maine has no K-12 tuition credit or deduction, and whether 529 money spent on K-12 expenses under the expanded federal rules is a qualified withdrawal for Maine depends on Maine’s conformity to the Code as of December 31, 2025, which the Department has not addressed (verify).

The student loan repayment tax credit, 36 M.R.S. § 5217-E, is for Maine residents who are paying education loans taken out after 2007 for an associate, bachelor’s or graduate degree from an accredited college in Maine or elsewhere, who live and file in Maine after graduating, and who have at least a minimum amount of earned income set each year from the state minimum wage. The credit is refundable and based on the loan payments actually made during the year, up to an annual cap and a lifetime cap (verify the 2026 caps and minimum earned income on the 2026 worksheet). A young parent repaying loans while raising children can stack it with the credits above.

Head of household and other quirks

Maine uses the federal filing status, so a single parent who qualifies as head of household federally is head of household in Maine, with the $23,550 standard deduction, the wider 5.8% bracket to $41,100, the $125,000 dependent credit threshold and the $153,400 deduction phase-out line. The 2% surcharge threshold for head of household is $1,500,000, the same as joint. A child’s own return gets a $0 personal exemption if the child can be claimed as a dependent, so a teenager with a summer job and $4,000 of wages leans on the standard deduction alone (verify the dependent’s standard deduction limit). Maine has no kiddie tax of its own; unearned income taxed to the child federally is in the child’s federal AGI and so is Maine income too.

What the federal 2025 law did not bring to Maine families

The federal changes that families noticed on the 2025 return, the larger standard deduction, the larger child tax credit, the deductions for tips and overtime, mostly happen below the AGI line or inside federal credits, and Maine either ignores them or follows only the AGI result. The federal child tax credit does not reduce Maine tax, though claiming it is what qualifies a child for Maine’s dependent credit. Tips and overtime deducted federally are fully taxed by Maine, which matters for a lot of families in hospitality and the trades. The federal standard deduction increase is replaced by Maine’s own smaller figures until 2027. The things that do carry over are above-the-line: the dependent care flexible spending exclusion on the W-2, HSA deductions, student loan interest, and the employer-paid student loan exclusion, all of which lower federal AGI and therefore Maine income.