Who will be eligible for the new property tax fairness credit?

Eligible homeowners or renters must meet all of the following requirements:

* They were Maine residents during any part of the tax year.

* They owned or rented a home in Maine during any part of the tax year and lived in that home during the year.

* They had Maine adjusted gross income of not more than $40,000. Social Security payments are not considered income.

* They paid property tax on a home in Maine during the tax year that was more than 10 percent of their Maine adjusted gross income or paid rent to live in a home or apartment in Maine during the tax year that was more than 40 percent of their Maine adjusted gross income.


For more information, call (207) 626-8475 or go to http://www.maine.gov/revenue/taxrelief/tnr.htm

Source: Maine Revenue Services


Portland Press Herald

Bob Pelletier, of Scarborough, received a letter in the mail this week telling him that the $1,200 property tax-and-rent refund he used to get each August won’t arrive this year.

“They’ve repealed the program and put in its place a basic pacifier that’s a $300 credit. It’s kind of a joke for someone on Social Security who is barely getting by,” said Pelletier, who declined to give his age. “It’s obviously going to be a huge difference for me.”


Pelletier’s letter from Maine Revenue Services indicated that instead of the refund he relies on, he may qualify for a $300 refundable tax credit starting in January.

Under the enacted biennial state budget, the Maine Residents Property Tax and Rent Refund Program, known as the “circuit breaker” program, was repealed and replaced by a refundable property tax fairness credit, starting Jan. 1, that can be claimed on the Maine individual income tax form. The tax credit, however, requires people to file a state tax return to receive it, even those who receive only Social Security income.

Fewer than half of the estimated 200,000 eligible households in Maine had applied for the circuit breaker program. In fiscal year 2012 it had about 89,000 recipients, said Michael Allen, the state’s associate commissioner for tax policy. In 2011 the average refund of $479 and the maximum refund was $1,600, according to Maine Revenue Services.

Under the new tax credit program, the state estimates about 125,000 people will qualify to receive tax credits totaling about $34 million to $35 million, Allen said.

Mainers who qualify can get a refundable credit of up to $300 a year, or up to $400 annually if they are 70 years or older.

The loss of the property tax and rent refund program may prove to be a hardship for some low-income Mainers, such as Pelletier.


“All bets are off. I have to make some changes. I’m going to sell my house and rent something cheaper. There’s nothing left to cut. There’s food, air, oil. What’s left to trim?” Pelletier said.

The state sent the letter this week explaining the changes to people who typically would get a property tax or rent refund in August. That letter, as well as information listed on the Maine Revenue Services website, is the extent of the state’s effort at alerting people who otherwise would be expecting a check, Allen said.

The new refundable tax credit will get some “outreach efforts” from the state, through word of mouth from tax professionals and volunteer groups who work with low income and older residents, Allen said.

The circuit breaker program had been promoted on the Maine Revenue Services website, at local libraries and through notices posted on the websites of towns and cities.

The changes in the tax relief programs saved the state’s general fund an estimated $20 million to $25 million, Allen said. That number is based on the total amount the property tax and rent refund program would have cost if had continued, he said. The circuit breaker program had been budgeted at slightly more than $43 million in fiscal 2012.

There are other programs available for homeowners to get some tax relief, such as the homestead exemption, which subtracts $10,000 from the assessed value of a Mainer’s home, effectively reducing the amount the homeowner pays in property taxes. Some narrow exemptions also exist for certain veterans, but otherwise there are few other tax benefits for low-income or elderly residents.


The circuit breaker program, which was established in 1972, had low participation rates. A study by the American Association of Retired Persons found a 40 percent participation rate among similar programs in other states.

Experts have speculated that people had not participated in the tax relief program for a variety of reasons. Some didn’t know it existed or assumed they didn’t qualify. Others may have found the application form too complicated or didn’t want to deal with the Maine Revenue Services.

“A lot of people in the past may not have participated for any number of reasons. It’s hard to know,” Allen said.

The new program focuses on Maine homeowners or renters who make $40,000 a year or less. To qualify, the individual must have paid property tax on a home in Maine that was more than 10 percent of their Maine adjusted gross income, or paid rent that was more than 40 percent of Maine adjusted gross income.

Social Security does not count as income. Sources of income include pensions and retirement pay, distributions from an IRA or 401(k) plan, rental income from real estate, interest from dividends from stocks or bonds, unemployment benefits, as well as damages paid under court judgments.

To get the tax credit, individuals must file state tax returns and fill out a special worksheet, which will be available in January.

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