With your house paid off and your kids no longer living under that same roof, you are limited in the deductions you can take from your income in retirement. It’s important to understand how your retirement income is taxed in the state you live in so you can make your retirement savings go farther.
In Maine, retirement income is taxed and you do not get a federal income tax deduction. However, if you have pension income that you included in your federal income, then you and your spouse can deduct up to $6,000 each. Keep in mind though, that with the exception of military pension, that $6,000 cap has to be reduced if you do in fact receive Social Security or railroad benefits.
The pension income that is deductible includes state, federal, military, and railroad benefits. There is a new law that will go into effect in Maine on January 1st of 2014 that will raise that $6,000 to $10,000.
We recommend you consult your financial advisor or tax professional with any specific questions on how your retirement income is taxed. If you don’t have one, we would be happy to recommend one in your local area. Give us a call at Retirement Think Tank at (888) 282-3653 or email us at firstname.lastname@example.org. We would welcome the opportunity to speak with you!