Yes, Maine does tax pensions, but a sizeable deduction keeps most retirees from paying tax on the full amount. For 2026, each retiree can subtract up to $49,824 of qualifying pension and retirement income from Maine taxable income, and a married couple filing jointly can subtract up to $99,648 combined. Social Security benefits are separately and fully exempt. The practical result: pensions are taxable in principle, but after the deduction many retirees owe Maine little or nothing on them.
How the Pension Income Deduction Works
Maine’s income tax starts from your federal adjusted gross income, so any pension payment, annuity, 401(k) distribution, or IRA withdrawal that is taxable federally lands in your Maine income to begin with. The pension income deduction then pulls a large chunk back out.
For tax year 2026, the maximum deduction is $49,824 per person. That figure is pegged to the maximum annual Social Security benefit payable at full retirement age ($4,152 per month in 2026). On a joint return each spouse calculates the deduction independently against their own retirement income, which is how a couple can reach the combined $99,648 ceiling.
Maine’s top marginal rate is 7.15%, with lower brackets of 5.8% and 6.75% below it. Without the deduction, every dollar of a $60,000 pension would be taxed at those rates. With it, most of that pension can come off the Maine return entirely.
The Social Security Offset
Before you apply the deduction to pension or IRA income, you have to reduce the $49,824 maximum by the Social Security and Railroad Retirement benefits you received during the year. Both the taxable and nontaxable portions count against the ceiling. If your Social Security benefits equal or exceed $49,824, nothing is left of the deduction and other retirement income is fully taxable in Maine.
Here is how it plays out for a single retiree in 2026 with $22,000 in Social Security and $40,000 from a state pension:
- Maximum deduction: $49,824
- Minus Social Security received: $22,000
- Remaining deduction available: $27,824
- Pension income: $40,000
- Deduction claimed: $27,824 (the lesser of the remaining deduction and the pension income)
- Pension income subject to Maine tax: $12,176
Only $12,176 of the $40,000 pension ends up on the Maine tax rolls. A retiree with no Social Security could shelter up to the full $49,824 of other retirement income; a retiree with a larger Social Security check would have less deduction left to work with.
Phaseout for Higher-Income Retirees
Starting with tax year 2025, the non-military portion of the deduction phases out at higher incomes. The 2025 federal AGI thresholds where the phaseout begins are:
- Single or married filing separately: $125,000
- Head of household: $187,500
- Married filing jointly or surviving spouse: $250,000
The amount by which your AGI exceeds the threshold is divided by $100,000 ($50,000 if married filing separately), capped at 1.00, and that fraction of the deduction is lost. A single filer with $175,000 of AGI loses half; at $225,000 or more the non-military deduction is gone entirely. The thresholds adjust for inflation beginning in 2026.
Which Retirement Income Qualifies
The deduction reaches a broad set of plans:
- Qualified pension and profit-sharing plans under IRC Section 401(a), including 401(k) plans
- Employee annuity plans under IRC Section 403, including 403(b) plans
- Eligible deferred compensation plans of state and local governments under IRC Section 457(b)
- Federal, state, and military retirement plans
- Traditional IRAs, SEP-IRAs, SIMPLE IRAs, and Roth IRAs
In practice the deduction matters most for traditional IRA and employer-plan payouts, since qualified Roth withdrawals already come out federally tax-free and so have no Maine-taxable amount to deduct.
Several items don’t qualify. Early distributions before age 55 from an employer plan are excluded unless they are part of a series of substantially equal periodic payments over your lifetime or the joint lives of you and your beneficiary; the age-55 rule does not apply to IRA distributions. Disability income reported as wages on your federal return rather than as pension income is out. Conversions, such as rolling a traditional IRA into a Roth IRA, don’t count as a retirement benefit for this deduction even though the conversion is federally taxable. The deduction is available to the person whose work generated the benefit, or to a surviving spouse receiving survivor benefits from that person’s plan.
Military Retirement Is Fully Exempt
Military retirement pay is completely exempt from Maine income tax. There is no dollar cap, no Social Security offset, and the high-income phaseout doesn’t apply. Whatever amount of military retirement is included in your federal AGI is subtracted on your Maine return.
For tax years beginning in 2026, Maine expanded the definition of military retirement to cover benefits from all uniformed services of the United States, including the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service, not only the traditional branches and Space Force.
Social Security Benefits
Social Security is not taxed by Maine at any income level or filing status, regardless of how much of it is taxable on your federal return. You don’t need a worksheet or an election; it simply never enters Maine’s tax base. The only place Social Security touches your Maine return is through the offset that reduces the pension income deduction described above.
How to Claim It on Your Return
The pension income deduction is a subtraction on Schedule 1S (Income Modifications) of Maine Form 1040ME. Before entering an amount there, work through the Pension Income Deduction Worksheet in the Form 1040ME instructions. The worksheet handles the maximum, the Social Security offset, and the income-based phaseout. File the completed worksheet with your return.
Military retirement pay has its own line on Schedule 1S. If you receive both military retirement and a civilian pension, claim the military exemption in full on one line and run the civilian pension deduction (with the Social Security offset) on the other.
If You Split Time Between Maine and Another State
Full-time Maine residents are taxed on retirement income from all sources, whether the pension comes from a Maine employer, an out-of-state company, or a federal plan. A Maine resident who pays another state’s income tax on the same income can claim a credit on the Maine return, though pensions are generally treated as Maine-source income for residents anyway.
Watch Maine’s statutory residency rule if you winter elsewhere. Even if you claim domicile in a state without an income tax, Maine can still tax you as a resident if you keep a permanent home in Maine and cannot show you were physically outside the state for more than 183 days during the year. Maine Revenue Services expects documentation: calendars, travel receipts, plane tickets, and credit card statements that back up the day count.