Below is a summary of tax changes enacted during the most recent Minnesota legislative session. If you have any questions about what's outlined below and the impact on your financial plan, please contact your CCM team.
Eligible Minnesota taxpayers will receive a one-time rebate based on reported adjusted gross income for tax year 2021. The income threshold to be eligible is $150,000 for a married, filing jointly or $75,000 for a single, head of household or married, filing separately. The rebate is $520 for married, filing jointly or $260 for single, head of household or married, filing separately. In addition, a rebate of $260 per dependent, up to a maximum of $780 will be paid. For example, a married couple (who meet the income threshold limit) with two children will receive a rebate of $1,040 under this provision.
Taxation of Social Security Benefits and Public Pensions
Starting for tax year 2023, eligible Minnesota taxpayers will no longer pay any Minnesota income tax on Social Security benefits based on reported adjusted gross income. Recipients of certain public pension income will also qualify for an exclusion of $25,000 for married, filing jointly or $12,500 for single or head of household filers. The income threshold for the full exclusion is $100,000 for married, filing jointly or $78,000 for single or head of household. The exclusion is phased out by 10% for every $1,000 of income in excess of the threshold.
Property Tax Refunds
Refunds claimed on a 2022 Form M1PR for homeowners and renters will receive a one-time increase of 20.572%. In addition, homeowners may now qualify for a special refund if property taxes increased by more than 6% from 2022 to 2023. The normal special refund qualification is for property tax increases of more than 12%.
Net Investment Income Tax
Starting for tax year 2024, an additional 1% Minnesota tax will be imposed on the net investment income of individuals, estates, or trusts in excess of $1 million. Net investment income generally consists of interest, dividends, capital gains, and income generated through passive activities such as rentals. Capital gain on the sale of agricultural land is excluded.
Standard and Itemized Deductions
Starting for tax year 2023, taxpayers with income exceeding $220,650 will be subject to a reduction in their standard or itemized deductions. The reduction will be 3% of income exceeding $220,650, but less than $304,970, and 10% of income exceeding $304,970. Taxpayers with income exceeding $1 million will be subject to the maximum reduction of 80% of the standard or itemized deductions.
Starting July 1, 2024, individuals can apply for a rebate of up to $1,500 that can be used toward the purchase of an electric-assisted bike. The credit certificate must be assigned directly to the retailer and is not reportable on an income tax filing.
NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.