On March 21, 2014, Governor Dayton signed a tax bill into law which included tax changes that were made retroactive for tax year 2013. Many of the provisions were to bring Minnesota tax law into conformity with federal tax law. We have included a recap below of provisions that are most likely to impact clients of Carlson Capital Management:
Income Tax Provisions Enacted to Conform Minnesota Law with Federal Law:
- Mortgage Insurance Premium Deduction
- Student Loan Interest Deduction
- Higher Education Tuition and Fees Deduction
- Qualified Charitable Distributions (QCD’s) from IRA accounts to charities
- Exclusion for Employer Provided Education, Adoption, and Transit Assistance
- Exclusion for Mortgage Debt Forgiveness
- Educator Expense Deduction
If any of these provisions are applicable to a return that has already been filed, the Minnesota Department of Revenue (MDOR) will contact taxpayers. The MDOR will make corrections automatically in all cases when it has sufficient information. In other cases it will send out a letter requesting additional information in order to make the corrections. The MDOR advises against filing amended tax returns to address these provisions, as it will cause delays in the process.
Estate and Gift Tax Provisions
- The Minnesota Gift Tax enacted in 2013 has been repealed entirely. Any gifts made in 2013 that previously were subject to the tax are no longer taxable, and a Minnesota Gift Tax return is no longer required. Refunds will be issued for any taxes already paid.
- The Minnesota Estate Tax exclusion will increase from $1 million to $2 million per person incrementally over a period of five years from 2014 through 2018.
- Estate tax rates will change to remove the punitive 41% marginal rate on the smallest estates. By 2018, the estate tax rates will range from 10% to 16% on the value of the estate in excess of the exclusion.
We are already applying these new provisions as we file returns presently being prepared, and as we meet with clients to plan for 2014. Please contact us if you have any questions about how the new law may impact your personal situation.