What’s new in Maine for 2026: the 2% surcharge, and the federal deductions Maine turned down

Two things happened in Augusta in April 2026 that reach the ordinary Maine return. The supplemental budget, L.D. 2212, added a 2% surcharge on Maine taxable income above $1,000,000 for a single filer and $1,500,000 on a joint return, retroactive to January 1, 2026, so the state’s top rate is now 9.15% instead of 7.15%. The same bill moved Maine’s conformity to the Internal Revenue Code forward to December 31, 2025, which settled a question that had hung over the 2025 filing season, and in doing so said no to the four new federal deductions most people have heard of: tips, overtime, the $6,000 senior deduction and car-loan interest. Every one of them is fully taxed in Maine. For a household under $1 million, the 2026 return is the 2025 return with slightly larger figures and the same answer to the question “does the federal break count here?” It does not.

Maine starts its return from federal adjusted gross income, then applies its own standard deduction, its own personal exemption and its own brackets. That design is why the 2025 federal law reached Maine the way it did. Anything Congress did above the AGI line, such as the higher Section 179 limit, flows into Maine automatically once the state adopts the Code date. Anything done below the line, which is where tips, overtime, the senior deduction and car-loan interest all sit, never arrives unless Maine writes it into its own law. Maine did not.

The 2% surcharge

For tax years beginning on or after January 1, 2026, Maine adds 2% to the tax on Maine taxable income above these lines: $1,000,000 single, $750,000 married filing separately, $1,500,000 for joint returns, surviving spouses and heads of household. The regular 7.15% top bracket still applies to every dollar over $64,850 single or $129,750 joint; the surcharge stacks on top, so the marginal rate over the threshold is 9.15%. The thresholds are fixed for 2026 and indexed for inflation from 2027.

Because the law passed in April and reached back to January, Maine Revenue Services revised its 2026 rate schedules on May 20, 2026 and reissued the withholding tables mid-year. Anyone whose pay crosses the line should expect the second half of 2026 to have made up for the first half, and should check Form W-4ME. The surcharge is on taxable income, not AGI, and it reaches capital gains and dividends the same as wages, since Maine has no preferential rate for gains. A people’s veto petition to repeal the budget that carried the surcharge did not qualify for the ballot, and there was no statewide question on the November 3, 2026 ballot.

Conformity: what Maine took and what it refused

Maine is a fixed-date conformity state. Until April 2026 it followed the Code as of December 31, 2024, which is why the July 2025 federal law did not reach Maine on its own. For the 2025 filing season the Governor administered conformity by directive under a 2025 law written for that purpose; L.D. 2212 then moved the date to December 31, 2025 for tax years beginning on or after January 1, 2025, with a list of Maine exceptions. Here is where each of the federal changes people ask about landed.

The Department’s own presentation on the federal law and the budget bill are the sources; see below. The charitable deduction for non-itemizers and Trump accounts have not been addressed by the Department (verify).

The practical effect is that a Maine worker’s state tax can now approach or exceed the federal tax, which almost never happened before 2025.

The standard deduction: Maine’s own number for one more year

The 2025 federal law raised the federal standard deduction to $16,100 single and $32,200 joint for 2026. Maine’s standard deduction has tracked the federal one, but the Legislature chose to set 2026 amounts of its own: $15,700 single and married filing separately, $23,550 head of household, $31,400 joint and surviving spouse. The additional standard deduction for age 65 or blindness is $2,050 per condition for a single or head-of-household filer and $1,650 per condition per spouse for a married couple. The Department says Maine conforms fully to the federal standard deduction beginning in 2027. The deduction, standard or itemized, still phases out from Maine AGI of $102,250 single, $153,400 head of household and $204,550 joint; the figures are in Maine figures at a glance.

The personal exemption is $5,300 for the taxpayer and $5,300 for a spouse, up from $5,150, and nothing for dependents, who are covered by the dependent exemption tax credit instead.

Retirees: a bigger pension deduction, and the senior deduction that stops at the border

The pension income deduction rises to $49,824 per person for 2026, from $48,216, because it is tied to the annual Social Security benefit at full retirement age. The rules that arrived in 2025 carry forward: the deduction phases out above federal AGI of $125,000 single, $187,500 head of household and $250,000 joint (2025 thresholds, indexed; the 2026 figures are to come), and distributions received before age 55 do not qualify unless they are part of a series of substantially equal periodic payments. Social Security is still subtracted in full, and still reduces the pension deduction dollar for dollar. The federal $6,000 senior deduction, as the table above says, does nothing on the Maine return. The details are in Maine for retirees.

Business owners: a new elective entity tax

For tax years beginning in 2026, a Maine partnership or S corporation may elect to pay Maine tax at the entity level at 7.15% on the owners’ distributive shares; the owners then take a refundable credit for 90% of the tax paid. The point is the federal SALT cap: tax paid by the entity is a business deduction above the federal AGI line, where the cap does not reach. Whether it pays depends on the owner’s federal itemizing position and the 10% that is not credited back. From 2026 the Maine resident credit for taxes paid to other states also covers other states’ pass-through entity taxes, though not New Hampshire’s business profits tax. Separately, the Maine capital investment credit was repealed for tax years beginning in 2025, with carryforwards preserved, so a 2026 equipment purchase gets the Schedule 1A bonus-depreciation add-back and no credit to soften it.

Smaller changes

• Estate tax exclusion. $7,160,000 for deaths in 2026, up from $7,000,000. Rates of 8%, 10% and 12% above the exclusion are unchanged, and taxable gifts made within one year of death still come back into the estate.
• Dependent exemption tax credit. Made permanent by L.D. 2212 at the indexed amount; $305 per dependent and $610 for a child under six for 2025, with the 2026 amounts to come and the under-six doubling to be confirmed (verify). See Credits and breaks for Maine families.
• Fourth estimated payment. Since late 2025, no underpayment penalty applies to the fourth installment if the year’s tax is paid in full by the last day of January; for 2026 tax, that is January 31, 2027.
• Itemized deduction cap. $37,100 for 2026, up from $36,300; medical and dental expenses are still outside the cap.

The 2026 return next to the 2025 return