Maine taxes capital gains as ordinary income, so your profit from selling a home, land, stocks, or other appreciated property is taxed at the same rates Maine applies to wages. For 2026, those rates are 5.8%, 6.75%, and 7.15%, and where your gain falls depends on your total taxable income and filing status.1Maine Revenue Services. State of Maine 2026 Individual Income Tax Rates The gain stacks on top of everything else you earned during the year. Federal capital gains tax applies to the same profit, so plan for both.
Figuring the Gain Before You Figure the Tax
Tax applies to the gain, not the sale price. Start with what the buyer paid, then subtract two things: your adjusted cost basis and your selling expenses. What remains is the realized gain.
Your cost basis is the original purchase price plus the cost of permanent improvements over the years you owned the property. A new roof, a kitchen renovation, or a structural addition all raise your basis and shrink the taxable gain. Routine repairs and maintenance don’t count. Keep receipts for improvements; they are the records that matter if Maine Revenue Services or the IRS asks.
Selling expenses come off next. Real estate commissions, attorney fees for deed preparation, and your share of Maine’s real estate transfer tax all reduce the gain. Maine’s transfer tax is $2.20 per $500 of value, split between buyer and seller, with an added $3.80 per $500 on any value above $1,000,000.2Maine Legislature. Maine Code Title 36 Section 4641-A – Rate of Tax; Liability for Tax
Sale price minus adjusted basis minus selling expenses equals the realized gain that both Maine and the federal government treat as taxable income.
Maine’s 2026 Tax Brackets
Maine has three brackets, adjusted each year for inflation. For 2026 they run as follows.1Maine Revenue Services. State of Maine 2026 Individual Income Tax Rates
Single Filers and Married Filing Separately
- 5.8% on taxable income under $27,400
- 6.75% on taxable income from $27,400 to $64,849
- 7.15% on taxable income of $64,850 or more
Married Filing Jointly and Surviving Spouses
- 5.8% on taxable income under $54,850
- 6.75% on taxable income from $54,850 to $129,749
- 7.15% on taxable income of $129,750 or more
Head of Household
- 5.8% on taxable income under $41,100
- 6.75% on taxable income from $41,100 to $97,299
- 7.15% on taxable income of $97,300 or more
Capital gains do not get their own bracket in Maine. The gain adds to your wages, business income, dividends, and everything else on the return. If you’re a single filer with $50,000 in salary and you realize a $30,000 gain, your total taxable income climbs to $80,000, and only the portion above $64,850 falls in the 7.15% bracket. Income below each threshold stays taxed at the lower rate.
Before those rates apply, you subtract Maine’s standard deduction and personal exemption. For 2026, the standard deduction is $15,300 for single filers, $30,600 for joint filers, and $22,950 for head of household. The personal exemption is $5,300 per person.1Maine Revenue Services. State of Maine 2026 Individual Income Tax Rates
Federal Capital Gains Tax on the Same Gain
The Maine number is only half the bill. Federal tax on the same gain depends on how long you held the asset.
If you held it one year or less, the gain is short-term and taxed at your regular federal income tax rate, which reaches 37% at the top. If you held it longer than a year, the gain is long-term and gets preferential rates of 0%, 15%, or 20%. For 2026, single filers pay 0% on long-term gains while total taxable income stays at or below $49,450, 15% up to $545,500, and 20% above that. Joint filers pay 0% up to $98,900, 15% up to $613,700, and 20% beyond.
Higher earners also owe a 3.8% net investment income tax on capital gains once modified adjusted gross income tops $200,000 for single filers or $250,000 for joint filers. Those thresholds are not indexed for inflation.
Stack it all together and a Maine resident at the top can pay 7.15% to the state and 20%, or 23.8% with the net investment income tax, to the federal government on a long-term gain. Worth knowing before you list the property.
The Home Sale Exclusion
The biggest break for most homeowners is the federal exclusion under IRC Section 121, which Maine honors because the state’s calculation starts from federal adjusted gross income. If you owned and used the home as your primary residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain from income, or up to $500,000 if you file jointly and both spouses meet the use test.3Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
Gain within the exclusion is not taxed at either level. Only the amount above $250,000 or $500,000 becomes taxable. You can generally use the exclusion once every two years.4Internal Revenue Service. Topic No. 701, Sale of Your Home The exclusion does not apply to investment property, second homes, or vacation properties you didn’t use as a primary residence.
Inherited Property Uses a Stepped-Up Basis
If you inherited the property, your cost basis is usually the fair market value on the date the previous owner died, not what they originally paid.5Internal Revenue Service. Gifts and Inheritances This stepped-up basis can wipe out most of what would otherwise be a large gain. If a parent bought a house for $80,000 decades ago and it was worth $350,000 when they died, your basis is $350,000. Sell for $370,000 and your taxable gain is $20,000, not $290,000.
The step-up applies for both federal and Maine purposes. If the estate filed Form 706 and elected an alternate valuation date, your basis may differ from the date-of-death value, so check any Schedule A to Form 8971 the estate sent you.
Nonresidents Selling Maine Property
If you live outside Maine and sell property located in the state, the buyer must withhold 2.5% of the total sale price and send it to Maine Revenue Services using Form REW-1. This applies to any sale of $100,000 or more.6Maine Revenue Services. Real Estate Withholding
The withheld amount is not an added tax. It’s a prepayment credited against whatever Maine tax you actually owe when you file a nonresident return, with a refund for any excess. If the 2.5% would clearly overshoot your real liability, say because your cost basis is high compared to the sale price, you can ask for a reduced or waived withholding by filing Form REW-5 at least five business days before closing. Later applications may be denied.6Maine Revenue Services. Real Estate Withholding
Estimated Payments If Your Gain Is Large
A big gain during the year can leave you underpaid for Maine tax by April. If your Maine tax after withholding and credits will hit $1,000 or more, and your prior-year liability was also $1,000 or more, you’re expected to pay estimated tax during the year.7Maine Revenue Services. State of Maine Estimated Tax for Individuals
The 2026 quarterly due dates are April 15, June 15, and September 15 of 2026, and January 15, 2027. You can pay the full amount with the first installment or split it into four.8Maine Revenue Services. 2026 Estimated Tax for Individuals Form 1040ES-ME To skip the underpayment penalty, your 2026 payments must reach at least the smaller of 90% of your 2026 tax or 100% of your 2025 tax, assuming 2025 was a full 12-month year.7Maine Revenue Services. State of Maine Estimated Tax for Individuals Close an August sale, and a payment by September 15 is the cleanest way to stay ahead of the penalty math.
Filing the Return
Maine capital gains go on Form 1040ME, the standard individual income tax return. Any state additions or subtractions from federal income appear on Schedule 1A and Schedule 1S.9Maine Revenue Services. Individual Income Tax Forms For a straightforward home or investment sale, there’s usually nothing to adjust because Maine and federal law treat the gain the same way.
Returns are due April 15 following the tax year. Maine grants an automatic six-month extension to file, but you still have to pay at least 90% of your liability by April 15 to avoid a late-payment penalty, and interest runs on any unpaid balance from the original due date regardless of an extension.10Maine Revenue Services. Individual Income Tax FAQ
The Maine Tax Portal handles filing, payment, and account management electronically. Third-party tax software also works. If you file on paper, mail the return to Maine Revenue Services, P.O. Box 1060, Augusta, ME 04332-1060.11Maine Revenue Services. Individual Income Tax 1040ME