Today too many Maine people struggle to keep up with rising property taxes that take a large bite out of their income. Renters too are increasingly paying a larger share of their income to keep a roof over their heads. This made the loss of the Maine Residents Property Tax and Rent Refund program (also known as Circuit Breaker) in 2013 all the more painful for the tax-burdened households that relied on it. When the new Property Tax Fairness Credit (PTFC) replaced the Circuit Breaker many people lost valuable help with property taxes and rent.
The good news is that the PTFC program is now going to provide more help to more Mainers. The Legislature made changes to the program-- at no extra cost to the state. Funds will be better targeted to help families with the least ability to pay their property tax and rent bills.
In order to make these improvements, the Legislature expanded the measure of what counts as income when determining eligibility for the credit. This means that nontaxable income will be added to modified adjusted gross income (MAGI) to determine eligibility including contributions to retirement accounts, distributions from IRAs, and social security payments. These sources of income, as well as others, were previously included as income in the Circuit Breaker program.
The following changes were made to the Property Tax Fairness Credit
More families will be eligible: Under the original PTFC, property taxes had to exceed 10% of income to qualify (Circuit Breaker used 4%). This is now reduced to 6% of income. Thousands of people who lost help when Circuit Breaker was eliminated will now become eligible for the PTFC.
More relief for those who really need it: Under the original PTFC, the maximum credit was only $300 for non-elderly taxpayers and $400 for those 70 or older. This will now increase to $600 for those under 65 and to $900 for those 65 and older.
Better benefit: Before this change, Maine residents only received a PTFC equal to 40% of the amount by which their property tax bill exceeded the eligibility threshold. The credited amount is now 50%. This means that all Mainers who qualify for a credit will get more money.
Eligibility levels phased out, ending abrupt cutoff: Under the original PTFC, residents earning more than $40,000 annually did not qualify for the credit. This created a “cliff effect” where residents earning one dollar more than $40,000 could not receive any credit at all. There are now three income phase-outs that better direct tax relief to families with low income who need it most. The credit gradually phases out to zero at $33,333 for a household of 1; $43,333 for a household of 2; and $53,333 for a household of 3 or more. These phase-outs will be adjusted for inflation over time.
Help for seniors in subsidized housing: Under the original PTFC non-disabled seniors living in subsidized housing did not qualify for the credit regardless of how much they paid out-of-pocket for their rent. Individuals in subsidized housing will now qualify. This will mean that many seniors will get back some of the vital help they used to receive from Circuit Breaker.
The amount of rent that is counted as property tax was reduced from 25% to 15% of the renter’s income: Most renters will still benefit from the changes to the PTFC even with this reduction because of all of the other changes in the eligibility formula. Unfortunately, some renters will see a smaller credit as a result of this change. While advocates opposed this reduction, it was still included in the final bill.
These changes to the PTFC represent a step in the right direction. While they do not restore all that was lost when Circuit Breaker was eliminated, they will provide much more relief to thousands more Maine people who truly need it.
How to Apply: You can apply for the PTFC when you file your 2014 state income tax return between January and April 15, 2015. The 2014 Maine Income Tax Form 1040ME will include a Property Tax Fairness Worksheet to help you figure out if you can get help. If you do not normally file an income tax return, you can apply for the credit by filing a tax return simply to receive the credit.