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GUIDANCE DOCUMENTPrinter Friendly Version
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Maine Revenue Services
for Individual Income Tax Purposes
Revised: July 25, 2006
RESIDENCY AND MAINE’S INCOME TAX
First, here are some basics that you need to understand.
If you are a Maine resident for the entire tax year, you must pay Maine tax on all of your taxable income regardless of its sources – wages, investment income, interest income, pension, and dividends among other things. If you are subject to income tax by another state or similar jurisdiction in another country on some of this same income, you may be allowed a credit against Maine income tax for all or some of the tax paid to the other state or jurisdiction. (See the MRS Instructional Pamphlet, “Credit for Income Taxes paid to Another Jurisdiction.”)
If you are a nonresident of Maine, you must pay Maine tax on all income from work performed in Maine. You must also pay Maine tax on all other income derived from Maine sources, including income derived from sole proprietorships, partnerships and S corporations, and capital gains from real or tangible property sold in Maine and income from rental of Maine property. Except for certain sales of a partnership interest on or after July 1, 2005, a nonresident generally does not have to pay Maine tax on interest, dividends, alimony, pensions or other income from intangible sources unless such income is from property employed in a business carried on in Maine.
If you are a part-year resident of Maine, you must pay tax on all of your income for the part of the year you were a Maine resident, and you must also pay tax on any income derived from Maine sources during the part of the year you were a nonresident.
Next, let’s define some key terms.
A “resident” taxpayer is a person who is:
A “nonresident” taxpayer is an individual who earns income in Maine but who is not
a Maine resident for income tax purposes.
The state in which you are domiciled is your permanent legal residence. This is
the place you intend to make your home for a permanent or indefi nite period of time.
It is generally the place where you dwell and which is the center of your domestic,
If you are domiciled in Maine, you are a Maine “resident” for income tax purposes – even if you are outside the state for the entire tax year. A person can have only one domicile; therefore, if you are domiciled in Maine you cannot be domiciled in another state or country. Similarly, if you are domiciled in another state or country, you cannot be domiciled in Maine. (However, as explained in the following section you may be domiciled in one state or country and still be a statutory resident for tax purposes in another state or country.)
Once your domicile is established in Maine, it continues until you establish domicile elsewhere. If your legal residency becomes an issue, you will have the burden of showing that you have established domicile in another state or country.
If you move out of Maine temporarily, without establishing domicile in the other state (or country), you continue to be domiciled in Maine. This is the case even if you sell your home in Maine.
For most people, even those who divide their time between different states, there is no question where they are domiciled; it is clear where they maintain their “home base.” Think of it this way: most people know the place they call home.
For others, though, it can be more diffi cult. When Maine Revenue Services determines where a taxpayer is domiciled, we consider all of the taxpayer’s relevant facts and circumstances (with a few exceptions noted below). You should do the same when determining how to file your income tax returns. Remember that although your intent is critical in determining where you are domiciled, a simple statement of intent – “I intended to make Florida my domicile in 2005,” for example – is not conclusive. Many factors are used as evidence of domicile.
It is important to know that no single factor will determine your state of domicile. Rather, all relevant factors are evaluated together. The criteria below are some of the factors we consider in making domicile determinations. You, too, should consider them to determine your domicile for income tax purposes.
Property ownership and residence:
Family and dependents:
Licenses and registrations:
Exceptions: Maine Revenue Services does not consider your charitable contributions (whether made to an organization located in or outside of Maine) when making domicile determinations. Also, the geographic location of your professional advisors (doctors, lawyers, accountants, etc.) is not considered.
If you are married, both you and your spouse are presumed to have the same state of residency, even though you may live apart for a portion of the year. (This presumption can be overcome if the facts clearly show that the spouses are domiciled in different states.)
STATUTORY RESIDENCY STATUS
Even if you are domiciled in another state, you may still be taxed as a Maine resident
if you are a “statutory resident.” (But this does not apply to military personnel. See
the section on “Military Personnel” for more information on state taxation of military
You are a statutory resident if:
1. you spent more than 183 days in Maine during the tax year (any portion of a day
2. you maintained a permanent place of abode in Maine for the entire tax year.
A permanent place of abode is a house, apartment, dwelling place, or other residence
that an individual maintains as his or her household, whether or not he or she owns it.
The term does not include a seasonal camp or cottage that is used only for vacations ,
a hotel or motel room, or a dormitory room used by a student during the school year.
A place of abode is not deemed permanent if it is maintained only during a temporary
stay in Maine for the accomplishment of a particular purpose.
RESIDENCY “SAFE HARBORS”
Maine law provides that for tax years beginning on or after January 1, 2007, certain individuals are not treated as resident individuals even though they are domiciled in Maine. In order to qualify for such a “safe harbor,” you must fall under either the “Group A” exception to the normal residency rules described elsewhere in this document, or the “Group B” exception. If you believe you qualify for one of these safe harbors, you should consult the Maine Revenue Services “Guidance to Residency: Safe Harbors,” which contains more detailed information on eligibility and fi ling requirements.
Group A Exception: An individual who is domiciled in Maine will nevertheless be treated as a nonresident individual if he or she satisfies all three of the following requirements:
Group B Exception (“foreign safe harbor”): An individual who is domiciled in Maine will nevertheless be treated as a nonresident individual if he or she satisfies all three of the following requirements:
NOW WHAT DO I DO?
Once you’ve determined where you are a resident, you can identify what types of income are taxable to Maine, what credits you may be entitled to, and what forms are needed.
If you are a full-year Maine resident, fi le Maine Form 1040ME, Individual Income Tax Return, or the Maine short Form 1040S-ME.
If you are a nonresident for all or part of the year and your Maine gross income meets
the Maine minimum fi ling requirement, you must fi le Form 1040ME and include
Schedule NR, Nonresidents/Part-Year Residents, or Schedule NRH, Nonresident
Example 1 - Full-year Domiciled Resident. Ben and Jennifer are retired. They
own a home in Maine in which they reside from May 1 to October 1 (153 days) each
year. Ben and Jennifer have Maine driver’s licenses and car registrations, and bank
Example 2 - Full-year Domiciled Resident. Stan and Susan own a house in Rockland, Maine. Their three children are enrolled in the Rockland school system, they register vehicles in Maine, are registered to vote in Rockland and do all of their banking in Maine. Stan is a merchant seaman who works for a company based out of Texas. His assignments take him out to sea for 4-5 months at a time; he always returns to Rockland to be with his family between trips. He and four co-workers split the rent on a small apartment in Texas to use as a home base immediately before and/or after each trip and to provide an address for mail delivery. Stan is domiciled in Maine together with the rest of his family; Maine is his permanent legal residence. He is, therefore, a full-year Maine resident for tax purposes.
Example 3 – Nonresident. David is domiciled in New York. He is transferred to
his employer’s Maine offi ce for a temporary assignment from March 1 to November
30 (274 days), after which he returns to New York. Although David takes an apartment
Example 4 – Statutory Resident. Pete and Pam were formerly domiciled in Winthrop, Maine. In 2004 they retired from their jobs with the State of Maine and bought a home in Port Charlotte, Florida. Within a few months of that purchase, they obtained Florida drivers licenses, registered to vote in Port Charlotte, opened bank accounts, and took other steps to establish domicile in Florida. As of the move, MRS considers them to be domiciled in that state. They continue to maintain their lakefront house in Winthrop for the entire year and return to Maine every year from mid-April to the end of October (198 days) to spend time with family and friends. Pete and Pam are statutory residents of Maine because they maintain a permanent place of abode and spend more than 183 days in Maine.
Example 5 – Nonresident, then Statutory Resident. Sarah is domiciled in
New Jersey. She is transferred to her employer’s Maine offi ce for an assignment from
June 1, 2004 to August 1, 2005. If Sarah resides in an apartment in Maine during this
period, she will not be a statutory resident in Maine in 2004, even though she spends
more than 183 days of the taxable year in Maine, because her apartment was not
maintained for the entire year. Only income she receives (such as her salary) that is
Example 6 – Statutory Resident, then Domiciled Resident. In example 5 above, Sarah became a statutory resident in 2004. She continued to maintain her apartment in 2005, changed her domicile from New Jersey to Maine in April 2005, and was present in Maine for more than 183 days in 2005. Under these circumstances, she will be a full-year resident in 2005 and all her income will be subject to Maine tax in that year.
Example 7 – Part-year residents. Susan and Sam have been domiciled in Maine for the past fi ve years. They are homeowners and calendar year taxpayers. Susan receives notice from her employer that she is being transferred to the company’s office in New York. On September 1, 2005, Susan and Sam move to a new home in Connecticut with the intent to make Connecticut their new state of domicile and take suffi cient steps to make it so. Prior to leaving, they put their house in Maine on the market for sale with a local real estate office. An offer is made for the house on October 1, 2005. The house is sold on December 1, 2005. Under these facts, Susan and Sam are part-year residents for 2005. For the period from January 1 through September 1, 2005, they were residents because they were domiciled in Maine. After that date, they relinquished their domicile in Maine and became domiciled in Connecticut. As residents, any income they received from January 1 to September 1, from whatever source, is subject to Maine personal income tax. For the period from September 2 through December 31, 2005, however, only income they receive that is connected to or derived from sources in Maine (such as any taxable gain on the sale of their Maine home) will be subject to Maine’s income tax.
RESIDENT and NONRESIDENT ALIENS
If you are a nonresident alien for federal tax purposes, but have Maine earned income, you may be required to pay Maine income tax. If you are a resident alien for federal tax purposes, and are a Maine resident for tax purposes, you will be required to pay Maine income tax on all your income. The same guidelines that apply to Maine residents, part-year residents of Maine or nonresidents apply to resident aliens and nonresident aliens alike.
A military member’s legal residence does not change solely because of a change in duty assignment. The legal residence designated at the time of entry into the service remains the same until the member establishes a new legal residence. A completed DD Form 2058, “State of Legal Residence Certifi cate” is evidence of a change in domicile.
If you are a nonresident who is stationed in Maine, your military income will not be taxed by Maine, nor will income from intangible sources, such as interest and dividends. However, if you work at an additional job in Maine or operate a business in Maine, that income will be taxed.
Generally, the spouse of a nonresident will be considered a nonresident during the period the military member is stationed in Maine and will be taxed only on income derived from Maine sources. In certain circumstances, however, a spouse of a nonresident serviceperson may be a resident of Maine. In the case of a serviceperson married to a Maine resident, the resident spouse will continue to be a Maine resident until domicile is established in another state.
Individuals domiciled in Maine who are members of the armed forces of the United
States, the National Guard or Reservists who received federal orders for active duty
continue to be domiciled in Maine for income tax purposes for the period of time they
Students generally remain residents of the state in which they were domiciled prior to
attending college (even if they attend college full-time in another state).
If you are a Maine resident who attends school in another state, you remain a Maine
Example 8 – Resident Student. John attends a college outside of Maine and lives in a dormitory room on campus. He graduated from high school in Maine and when he returns to Maine, he stays with his parents. Even though he spends most of his time in another state, he continues to be a Maine resident because he has not established a new domicile in another state.
Example 9 – Nonresident Student. Donna is domiciled in New Jersey and attends college in Maine. She lives in a dormitory room on campus during the school year (240+ days), which runs from late August to May. When the school year ends, she moves out of the dormitory and resides out of state with her parents. The following August, Donna returns to college for another year and again resides in a dormitory room on campus. Donna’s domicile remains the same as her parents. Although she spends most of her time in Maine, she has not changed her previous domicile. In addition, she is not a statutory resident by physical presence. Even though she was present in Maine for more than 183 days, her dormitory room is not considered a permanent place of abode.
ANSWERS TO FREQUENTLY ASKED QUESTIONS
Q. Each year, I live in Maine for fi ve months and in another state for seven months. Does this mean I am not a Maine resident?
A. Not necessarily. If you were domiciled in Maine before you began spending time in the other state, you continue to be a full-year Maine resident unless, or until, you have taken steps to establish domicile in the other state or country.
Q. I retired, sold my permanent home in Maine and live the life of a nomad, traveling around the country in a recreational vehicle. Can I correctly say that I am not a resident of any state?
A. No. Everyone is domiciled somewhere. In your case, even though you sold your Maine home, you continue to be a Maine resident until you establish a domicile in another state.
Q. My job requires that I move from Maine to another state for the next two years. Will I still be a Maine resident?
A. Yes. If you temporarily move to another state and intend to stay only for a limited
time (no matter how long), your residency does not change. If the other state taxes
the same income that is taxed by Maine, you may be able to claim a credit for
taxes paid to the other state. When you fi le your Maine Form 1040ME, include
Schedule 3, Worksheet for Credit for Income Tax Paid to Other Jurisdictions.
If, on the other hand, you move to another state with the intention of making
it your home permanently or for an indefi nite time, and take steps sufficient to
establish a new domicile in that location, you no longer are a Maine resident
Revised July 25, 2006
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