Maine Earned Income Tax Credit

Maine's Earned Income Credit is a tax credit that can put money back in your pocket at tax time. For tax years beginning on or after January 1, 2022, the Maine credit equals 25 percent of your federal earned income tax credit if you have qualifying children, and 50 percent of the federal credit if you have no qualifying children. You claim it on the Maine income tax return, Form 1040ME, Schedule A. The credit is meant to reward work, so it is aimed at people who earned income during the year and filed a return.

The best part is that it is refundable for Maine residents. For Maine residents and part-year residents, the credit is refundable, which means it can produce a refund even when it is larger than the tax you owe. So a worker with a small tax bill, or none at all, can still get cash back from this credit. For a low-income worker, that refundable feature can turn a modest credit into real money at tax time, which is the point of the program.

The rule is a little different for nonresidents. For nonresidents, the Maine credit is not fully refundable. It may not reduce the Maine income tax to less than zero, so it can lower what a nonresident owes but does not pay out beyond that. Where you lived during the year decides which rule applies to you. If you moved into or out of Maine during the year, that residency status is what decides whether the credit can pay out as a refund.

You need the federal credit first. The Maine credit is available to Maine taxpayers who properly claim the federal earned income tax credit on federal Form 1040 or Form 1040-SR. In other words, the Maine credit is built on top of the federal one, so claiming the federal credit correctly is the first step. If you qualified for the federal credit, claiming the Maine credit is usually a short additional step on your state return rather than a separate application.

Some workers qualify even without the usual profile. Taxpayers who would otherwise qualify for the federal credit but filed using an IRS-issued Individual Taxpayer Identification Number, or who had no qualifying children and were at least age 18 at the end of the year, may also claim the Maine credit. So do not assume you are shut out just because your situation is different. It is worth reading the rules or asking, since some workers qualify who assume they cannot.

Maine has raised this credit over the years, and it now sits at 25 percent, or 50 percent for filers with no qualifying children. To claim it, use the Maine Earned Income Tax Credit Worksheet for your tax year and file it with your Maine return. If you have questions, Maine Revenue Services handles the credit. Because the Maine credit is a set share of the federal one, the larger your federal earned income tax credit, the larger your Maine credit will be.