Maine Transfer Tax Exemptions: Family, Trusts, and Form RETTD

Maine exempts roughly two dozen categories of real estate transfers from the state transfer tax under 36 M.R.S. § 4641-C.¹ The most commonly used Maine transfer tax exemptions cover deeds between close family members, transfers into wholly-owned LLCs or trusts, mortgage and foreclosure documents, corrective deeds, transfers to and from government entities, and gifts of conservation land. Every exempt transfer still requires a Real Estate Transfer Tax Declaration (Form RETTD) filed with the county Registry of Deeds, with the correct statutory subsection listed as the exemption code.

Family Transfers

Subsection 4 of § 4641-C exempts deeds between spouses, between a parent and child, and between a grandparent and grandchild, provided no actual consideration is paid.¹ “No actual consideration” means no money changes hands. Reciting one dollar as a formality is standard and doesn’t defeat the exemption; selling the property to a child at market price does.

The list of qualifying relatives is narrow. Siblings are not covered. Neither are aunts, uncles, cousins, nieces, nephews, or in-laws. A transfer between any of those parties owes the full tax unless a different exemption applies.

Divorce gets its own carve-out within the same subsection. Deeds between spouses in a divorce proceeding are exempt whether or not consideration changes hands, because the transfer is part of a court-supervised property division rather than a sale.¹

Transfers Into LLCs, Trusts, and Other Entities

Moving property into an LLC, revocable trust, or family partnership is common for liability protection or estate planning, and Maine generally does not tax these moves when the underlying ownership doesn’t really change. Subsection 19 of § 4641-C exempts any deed that reflects a “mere change in identity or form of ownership” as long as there is no change in beneficial ownership.¹ Transferring a property you own outright into a single-member LLC that you also own outright is the textbook example.

The identical-ownership rule is strict. If the LLC is 80% you and 20% a business partner, the beneficial ownership has shifted and the exemption is lost. Any new owner, any change in percentages, and the transfer becomes taxable.

Several narrower entity-related exemptions sit alongside subsection 19:

Subsection 15 covers transfers to or from a trustee, nominee, or straw party when the beneficial owner stays the same.¹
Subsection 16 covers transfers between a family corporation, partnership, or LLC and its members during formation, dissolution, or liquidation, when the only consideration is shares or interests in the entity. The entity qualifies as “family” when a majority of the owners descend from a common ancestor who also transferred the property.¹
Subsection 7 covers deeds resulting from corporate mergers or consolidations where no gain or loss is recognized under the Internal Revenue Code.¹
Subsection 8 covers transfers from a subsidiary corporation to its parent when the only consideration is cancellation of the subsidiary’s stock.

Mortgages, Foreclosures, and Corrective Deeds

Subsection 2 exempts mortgage deeds, discharges of mortgages, and partial releases. Deeds in lieu of foreclosure also qualify, but only the borrower is exempt in that transaction. On a foreclosure sale to a third party, the tax applies only to the portion of the proceeds that exceeds the amount needed to satisfy the mortgage and all junior claims.¹

Subsection 3 exempts corrective deeds that fix clerical errors in a previously recorded document, so long as the correction doesn’t change ownership or involve additional consideration. Misspelled names and defective legal descriptions are the usual reasons.¹

Government, Conservation, and Other Exemptions

Subsection 1 exempts transfers to or from the United States, the State of Maine, and any of their agencies or subdivisions, including gifts of real property to those entities and transfers to the Maine Department of Transportation or the Maine Turnpike Authority for transportation purposes.¹

Subsection 17 exempts gifts of land or conservation easements to qualifying nonprofit conservation organizations, provided no consideration is paid and the transfer meets the requirements of Maine’s conservation easement law.¹

A few more that come up regularly:

Subsection 5 exempts tax deeds issued through tax lien sales.
Subsection 6 exempts deeds of partition when co-owners divide property and each takes a share equal to their undivided interest. If anyone takes more than their proportional share, tax applies to the difference.¹
Subsection 11 exempts deeds of distribution from an estate under Maine probate law.
Subsection 14 exempts transfers made under the United States Bankruptcy Code.¹

Gift Deeds Are Not Broadly Exempt

Maine has no blanket exemption for deeds of gift. If you give property to a friend, a niece, a cousin, or anyone outside the specific family relationships in subsection 4, the full transfer tax is owed even though no money changes hands. The gift label alone does no work; the relationship or the transaction type has to match one of the statutory categories.

How to Claim an Exemption on Form RETTD

Every deed recorded in Maine must be submitted with a Real Estate Transfer Tax Declaration, Form RETTD, available from Maine Revenue Services or any county Registry of Deeds.² The form is required even when the transfer is fully exempt.

Fill in the grantor and grantee names, the property location, and the consideration paid (enter zero if none). The critical field is the exemption code, where you enter the subsection number of § 4641-C that fits your transfer. The declaration goes to the Register of Deeds in the county where the property sits, at the same time you present the deed for recording. Maine Revenue Services reviews declaration data and can follow up if the claimed exemption doesn’t match the underlying transaction, so the code you enter needs to be one you can defend.

Federal Gift Tax Filing

An exempt state transfer is not a tax-free event for federal purposes. When property moves for less than fair market value, the IRS treats the difference as a gift. For 2026, the annual gift tax exclusion is $19,000 per recipient.³ Real estate almost always exceeds that figure, so most exempt family transfers require filing IRS Form 709.⁴ Filing the form doesn’t mean tax is owed. The lifetime gift and estate exemption for 2026 is $15 million per person, and the reported gift simply reduces the amount you can pass tax-free at death.

Transfers between spouses generally don’t require a gift tax return when the receiving spouse is a U.S. citizen.⁴

Carryover Basis: The Hidden Cost of a Family Transfer

The bigger federal issue with an exempt family transfer is basis. When you receive property as a gift, your cost basis is the same as the donor’s. If a parent bought a house for $80,000 thirty years ago and deeds it to you today, your basis is $80,000.⁵ Sell it later for $350,000 and you may owe capital gains tax on $270,000. Inheriting the same house at the parent’s death produces a stepped-up basis equal to the fair market value on the date of death, which can eliminate that gain entirely. A transfer-tax-exempt gift during life can create a much larger income tax bill later than simply waiting to inherit the property. Run the numbers on both scenarios before recording the deed.

Medicaid Look-Back

An exempt family transfer can also complicate long-term care planning. Maine applies a 60-month look-back period when someone applies for long-term care benefits through MaineCare. Any uncompensated transfer within that window can trigger a penalty period during which the applicant is ineligible for benefits, calculated by dividing the value of the transferred asset by the average monthly cost of nursing home care at the time of application.

The federal gift tax annual exclusion has no bearing here. A $200,000 property transferred to a child counts as a $200,000 uncompensated transfer for MaineCare purposes regardless of how it’s handled for gift tax reporting. If long-term care is a possibility within five years, talk to an elder law attorney before signing the deed.

1
Maine Legislature. Maine Code 36-4641-C – Exemptions
2
Maine Revenue Services. Maine Real Estate Transfer Tax Declaration Form RETTD
3
Internal Revenue Service. What’s New – Estate and Gift Tax
4
Internal Revenue Service. Instructions for Form 709
5
Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust