StructuredSales.org
StructuredSales.org
Maine sellers do not all look alike. A Bath family closing the books on a boat shop, a Washington County landowner selling blueberry ground, an Aroostook potato farm passing to the next generation, and a nonresident who has owned a camp on a lake for thirty years are four different deals. What they share in 2026 is a rate schedule that was already steep, plus a surcharge that did not exist the year before.
Maine taxes capital gain as ordinary income. There is no long-term preference and no retired-farmer exclusion of the Iowa kind. The new piece is a 2% surcharge on Maine taxable income over a high threshold. A structured installment sale under IRC §453 does not lower the 7.15% bracket on a large sale, because that bracket starts well under $150,000. It can keep a year from ever crossing the surcharge line. That is a narrower claim than the ads make, and it is the honest one.
Maine Revenue Services published a revised 2026 rate schedule on May 20, 2026. For married couples filing jointly, taxable income under $54,850 is taxed at 5.8%. From there to $129,750 the tax is $3,181 plus 6.75% of the excess. At $129,750 and above it is $8,237 plus 7.15% of the excess. Single filers hit 7.15% at $64,850. Heads of household hit it at $97,300. The standard deduction for 2026 is $15,700 single and $31,400 joint, and the personal exemption is $5,300, before phaseouts. Those are the regular rates. They are not the whole bill.
For tax years beginning on or after January 1, 2026, the tax is increased by 2% of Maine taxable income over $1,000,000 if you file single, $750,000 if you file married separately, and $1,500,000 if you file jointly, as a head of household, or as a surviving spouse. Estates and trusts use the single threshold. The thresholds are indexed for inflation starting with tax years that begin in 2027, so 2026 uses the round numbers. The surcharge is only on the income above the line. A joint filer with $1.6 million of Maine taxable income owes the extra 2% on $100,000, not on $1.6 million. Above the line the marginal rate is 9.15%, the 7.15% bracket plus the 2%.
Maine's surcharge is a slice of the excess. Maryland's capital-gains surtax, in our Maryland guide, can apply to the whole gain once federal adjusted gross income passes $350,000. The Massachusetts surtax is 4% of taxable income over an indexed threshold near $1.1 million, on top of a flat 5% long-term rate. Maine's ordinary brackets do the heavy lifting long before the surcharge starts. Federal long-term rates of 0%, 15%, and 20%, and the 3.8% net investment income tax, sit on top. For 2026 the joint 20% federal threshold is $613,700 of taxable income. The net investment income tax still keys off $250,000 of modified adjusted gross income on a joint return.
Maine's land is the asset. Potato ground in Aroostook, wild blueberry barrens Down East, north-woods timber, and coastal property from Portland to Mount Desert have basis that is often decades old, or a step-up from a death that is itself no longer current. None of that land gets a Maine capital-gains exclusion for being a farm or a woodlot. Washington exempts timber and deeded real estate from its excise tax. Maine does not. The gain is in Maine taxable income, and if the year is large enough it is in the surcharge too.
Maine taxes nonresidents on Maine-source income, and gain from real property in the state is the clearest part of that category. Because Maine taxable income follows federal income, with Maine modifications, installment gain reported on Form 6252 is generally Maine income in the year it is federal income. Later payments on a camp, a timber tract, or a Commercial Street building can stay Maine-source after you leave. A sale of a business interest depends on how much of the business was carried on in Maine. Have a Maine preparer compute that fraction.
Family transfers need the federal related-party rules from the start. If a related buyer resells within two years, §453(e) can tax the original seller at the resale. A sale of depreciable property between related persons can be barred from the installment method under §453(g). Those rules show up when a woodlot or a boatyard moves to a niece or a nephew. Our farmland guide and 1031-versus-installment comparison cover the federal choice. A 1031 that works federally generally keeps the gain out of Maine income. An installment sale recognizes it on a schedule.
The 7.15% bracket starts at $129,750 of joint taxable income. Almost any sale of a business or a serious parcel is already there, in one year or in eight. Spreading the gain can keep each year's Maine taxable income under $1.5 million on a joint return, so the 2% never starts. The same schedule can keep federal taxable income under the 20% long-term breakpoint and shrink the net investment income tax.
Recapture still comes due at closing. Ordinary income under §1245, and the ordinary-income piece of §1250, is recognized in the year of sale even if every dollar of price is deferred. On a boat shop that is the equipment. On a farm it is the machinery, the irrigation, and similar personal property. The land gain is the piece that can ride the installment schedule. If installment obligations arising in the year and still outstanding at year-end exceed $5 million in face amount, §453A charges interest on the deferred federal tax. Price the interest before you fall in love with a twenty-year term. The mechanics of assigning the deferred price, so you never take receipt of it, are in the tax-treatment guide.
A married couple, Maine residents, have $120,000 of Maine taxable income before the sale. They sell stock in a family boat-building company. Long-term gain is $2,400,000. The stock is not depreciable property in their hands, so this sketch has no year-of-sale recapture. They compare recognizing the gain at once with eight slices of $300,000. The deferred balance stays under $5 million. Interest on the payments is omitted. The sketch uses the May 2026 joint rate schedule and treats the $120,000 as taxable income already, so it does not subtract the standard deduction a second time. Federal figures use 2026 joint long-term brackets and the 3.8% net investment income tax. This is an estimate of tax on the gain, not a return.
| Lump sum | Eight installments | |
|---|---|---|
| Maine taxable income | $2,520,000 once | $420,000 a year |
| Maine tax on the gain, including the surcharge | $191,961 | $171,290 |
| Of which the 2% surcharge | $20,400 | $0 |
| Federal long-term capital gain tax | $455,315 | $360,000 |
| Federal 3.8% net investment income tax | $86,260 | $51,680 |
| Combined tax on the gain | $733,536 | $582,970 |
Maine tax on the gain is about $20,700 lower. About $20,400 of that is the surcharge, which a $420,000 year never triggers. The regular 7.15% applies to nearly all of the gain either way. The federal difference is larger: each installment year stays inside the 15% long-term band, and the net investment income tax has a smaller base. Together the illustration is about $150,600 lower. A wage spike, a second parcel, or a filing status of married filing separately, with its $750,000 surcharge threshold, would change the Maine column. Nothing here is a quote.
The surcharge in this sketch is 2% of Maine taxable income over $1.5 million, not 2% of the whole gain. Joint filers in 2026 use that $1.5 million line. It is an estimate, not a savings promise.
Put the surcharge threshold next to your other Maine taxable income, not next to the sale price. A couple with a pension, Social Security, and a remaining rental can have less room under $1.5 million than the headline suggests. If you are selling timber or a camp and then leaving the state, ask which payments stay Maine-source. If the buyer is family, ask about §453(e) before you celebrate a two-year flip. Vermont next door has a 40% exclusion Maine does not. Massachusetts has a different surtax. The contract language still has to be done before closing, in Maine as everywhere else. After the wire, the installment method is gone.
For tax years beginning on or after January 1, 2026, Maine adds 2% on the portion of Maine taxable income over $1,000,000 for single filers, $750,000 for married filing separately, and $1,500,000 for joint filers, heads of household, and surviving spouses. The regular top rate stays 7.15%. Above the line, the marginal rate is 9.15%. The dollar thresholds are indexed starting with tax years beginning in 2027. The surcharge applies to taxable income over the threshold, not to every dollar of income.
No. Maine taxes capital gain as ordinary income. There is no retired-farmer exclusion and no timber preference of the kind some other states offer. Federal long-term rates and the 3.8% net investment income tax still apply on top.
It can, if each year's Maine taxable income, including the gain recognized that year, stays at or under the threshold for your filing status. A joint filer whose other taxable income is modest can often keep a multi-million-dollar gain under $1.5 million a year by spreading it. The 7.15% bracket starts much lower, at $129,750 of joint taxable income for 2026, so most of a business sale is already in the top regular bracket either way. The surcharge is the Maine dollar that timing can turn off.
Maine taxes nonresidents on Maine-source income. Gain from real property in Maine is Maine-source, and installment gain is generally recognized for Maine when it is recognized federally. Leaving the state does not, by itself, end tax on later payments from a Maine camp, timber tract, or commercial building. Have a Maine preparer source any sale of a business interest, because that depends on how much of the business is in Maine.
Maine Revenue Services says the surcharge also applies to estates and trusts, using the single-filer threshold. A sale inside an estate or a trust needs its own computation. This page's illustration is a joint individual return.
Last reviewed: October 22, 2026.
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