Income/Estate Tax Update Presented by: Christina C. Ward, Assistant - PowerPoint PPT Presentation

Maine Revenue Services 2015 2015 Income/Estate Tax Update Presented by: Christina C. Ward, Assistant Director Sandra J. Lind, Tax Section Manager www.m www.maine aine.gov .gov/rev /reven enue ue

2015 Maine Income and Estate Tax Developments Overview  Conformity  Tax Rate Changes  2015 Tax Law Changes  2016 Tax Law Changes  Job Creation through Educational Opportunity

Conformity  Conformity with the Internal Revenue Code and amendments was extended to the United States Internal Revenue Code of 1986 as amended through December 31, 2014.

Conformity  Conformity with the Code applies unless otherwise stated in Maine law.  Applies to tax years beginning on or after January 1, 2014 and to any prior years as specifically provided by the Code.

Sales/Use Tax Rate Increase  General Sales/Use tax rate  5.5% for purchases made after July 1, 2015.  Casual Rentals of living quarters tax rate  8% through December 31, 2015;  9% beginning January 1, 2016.

Individual Income Tax Rates  Indexing suspended for tax years 2014 and 2015.  2015 rates same as those in effect during 2013 and 2014 tax year.

Individual Income Tax Rates  Changes for 2016:  tax rate brackets of 0%, 6.5% and 7.95% replaced with 5.8%, 6.75% and 7.15% tax rate brackets;  single rate schedules adjusted for inflation based on the chained consumer price index  Head of household rate schedules = 1.5 times the single brackets  Married taxpayers filing joint rate schedules = 2 times the single brackets.

Gains from Sale of Timberlands  Income subtraction modification  6 2/3% of the gain realized on the sale of eligible timberlands held for at least a 10-year period beginning on or after January 1, 2005.  Increased by 6 2/3 percentage points for each additional year beyond the tenth year, up to 100% of gain.  Unused portions may be carried forward for up to 10 years.

New Markets Capital Investment Credit  Income subtraction modification.  Income included on the taxpayer’s federal income tax return from the Maine new markets capital investment credit under § 5219-HH is subtracted for state tax purposes.

Dental Care Access Credit  Available only for eligible dentists certified by the Department of Health and Human Services certified through 2015.  Credit repealed December 31, 2020.

Primary Care Access Credit  Eligibility expanded to include otherwise qualified persons already practicing in an underserved area.

Pine Tree Development Zones  Pine Tree Development Zone benefits are extended to call centers in Aroostook and Washington counties.

Property Tax Fairness Credit  No Changes.  The credit is equal to 50% of the amount by which property tax paid or rent constituting property taxes paid (benefit base) during the tax year exceeds 6% of total income. The credit is capped at $600 ($900 for individuals 65 years of age or older).

Property Tax Fairness Credit  Benefit base limitations: Subject to inflation adjustment for tax years beginning after 2015.

Changes for tax years beginning on or after January 1, 2016  Standard Deduction Amount.  $11,600 for individuals filing single and married persons filing separately;  $17,400 for heads of households; and  $23,200 for married persons filing jointly or surviving spouses.  Additional amount for age/blindness same as federal amounts for age/blindness.

Changes for tax years beginning on or after January 1, 2016  Standard/Itemized Deduction Phaseout.  Applicable to taxpayers whose adjusted gross income exceeds:  $70,000 single or married filing separately  $105,000 head of household  $140,000 married filing jointly or surviving spouse

Changes for tax years beginning on or after January 1, 2016  Military Pension Income Deduction.  Benefits received under a military retirement plan, including survivor benefits, are fully exempt from Maine income tax.

Changes for tax years beginning on or after January 1, 2016  Sales Tax Fairness Income Tax Credit.  Definition of income (same as PTFC):  Federal total income (before adjustments)  Nontaxable social security and railroad retirement  Tax exempt interest  Certain business and capital losses

Changes for tax years beginning on or after January 1, 2016  Sales Tax Fairness Income Tax Credit.  Base credit = $100 to $180 (based on number of exemptions claimed)  Credit subject to phaseout if income exceeds:  $20,000 - Single taxpayers  $30,000 - Head of household taxpayers  $40,000 - Married taxpayers filing jointly

Changes for tax years beginning on or after January 1, 2016  Sales Tax Fairness Income Tax Credit.  Phaseout income threshold amounts adjusted for inflation for tax years beginning after 2016.  Credit may not be claimed by:  Married taxpayers filing separately;  Safe-harbor residents;  Individuals who are incarcerated and have no family members living in Maine.

Changes for tax years beginning on or after January 1, 2016  Adult Dependent Care Credit.  25% of the “applicable percentage” of adult dependent care expenses, up to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals.  The “applicable percentage” is the same percentage use to calculate the federal child and dependent care credit – based on earned income.

Changes for tax years beginning on or after January 1, 2016  Adult Dependent Care Credit.  Refundable, up to $500.  Part-year resident and nonresident credit prorated based on ratio of Maine-source income to federal adjusted gross income.  Credit not refundable for nonresident taxpayers.

Changes for tax years beginning on or after January 1, 2016  Earned Income Tax Credit.  Credit becomes fully refundable for Maine residents.  Refundable portion pro-rated for part- year residents.  Nonrefundable for nonresidents.

New Refund Option  “ ReliaCard ” Pre -paid Visa Refund Card through US Bank.  Tax years beginning on or after January 1, 2016.  Form 1040ME  ReliaCard checkbox  Taxpayer date of birth  Spouse date of birth, if applicable

“ ReliaCard ” Pre -paid Visa  Other refund options still available  DDR  Paper check  Credit forward to subsequent tax year

Repealed provisions  Applicable to tax years beginning on or after January 1, 2016:  Direct Deposit Refunds to NextGen Account;  Subtraction for Long-term Care Premiums;  Subtraction for Contributions to 529 Plans;  Jobs and Investment Tax Credit*;

Repealed provisions  Family Development Account Credit;  Credit for Employer-assisted Day Care * ;  Credit for Employer-provided Long-term Care Benefits*;  Credit for the Elderly or Disabled;  Forest Management Planning Credit;

Repealed provisions  High-technology Investment Tax Credit * ;  Credit for Dependent Health Benefits * ;  Quality Child Care Investment Credit * ;  Credit for Biofuel Commercial Production*; * Denotes that unused credit amounts may be utilized to the fullest extent allowed by the carryforward provisions for the credit.

Estate Tax  Maine Exclusion Amount  For estates of decedent’s dying on or after January 1, 2016, the Maine exclusion amount is indexed to the federal exclusion amount.  The tax rate schedule is amended to apply to the taxable estate in excess of the applicable federal exclusion amount.

Job Creation Through Educational Opportunity Program  Changes applicable to tax years beginning on or after January 1, 2015:  The requirement that a qualified individual must work for an employer located in Maine is eliminated;  However, the employee must work in Maine except the employee may work outside Maine for up to 3 months during the tax year.

Job Creation Through Educational Opportunity Program  Credit becomes available to self- employed individuals who have earned an associate or bachelor’s degree and are making eligible education loan payments.

Job Creation Through Educational Opportunity Program  Changes applicable to tax years beginning on or after January 1, 2016:  Associate or Bachelor’s degree from non - Maine community college, college or university earned after 2015 eligible for credit.  Credit refundable for all Associate degrees.  Graduate degrees earned in Maine after 2015 eligible for non-refundable credit.

Job Creation Through Educational Opportunity Program  Residency requirement while attending college is removed.  Restriction on refinanced and consolidated loans is removed.

Questions?

Contact Information  E-File Help Desk (1040 only)  efile.helpdesk@maine.gov (207) 624-9730  Tax Practitioner’s Hotline  (207) 626-8458  To order Forms  www.maine.gov/revenue (207) 624-7894

Contact Information  Income Tax Division  income.tax@maine.gov (207) 626-8475  Withholding Tax Section  withholding.tax@maine.gov  (207) 626-8475 (touch-tone callers, press 1, then option 4)  Sales Tax Division  sales.tax@maine.gov (207) 624-9693

Contact Information  Tax Violations Hot Line  MRS.TAXTIP@maine.gov (207) 624-9600  Refund Information  www.maine.gov/revenue  Frequently Asked Questions  www.maine.gov/revenue