More Credits Where Credits Are Due

Minnesota’s Legislature has given state taxpayers a bunch of tax credits and subtractions from income that they can start using on 2017 returns. Most apply to special situations. Nonetheless, many Minnesota taxpayers – who now are starting to fill in the blanks on their 2017 returns — are going to like these NEW tax breaks when their refunds arrive! Here are some to note:

• Social Security Benefit Subtraction – This is one with fairly broad effect. Minnesotans who receive Social Security or Railroad Retirement benefits can take as much as $3,500 off their income if filing as an individual, or $4,500 if filing a joint, married return (or widow/widower). There are income limits. For example, the subtraction for a married couple phases out at $99,500 of what is called “provisional income.” The subtraction is claimed on state Tax Form M1M.

• Student Loan Credit – Minnesotans who are making payments on their loans can receive as much as a $500 tax credit per person, based on their payouts during 2017. Claim the credit on Form M1SLC.

• Education Savings Accounts –Minnesota taxpayers who contributed to a Section 529 education plan during 2017 might be able to collect a tax credit of as much as $500. Once again, income limits are involved. The maximum payments go to singles or couples with adjusted gross income of $75,000 or less. Partial credits are available to couples with as much as $160,000 in income. Taxpayers who can’t take advantage of the credit probably can subtract as much as $1,500 (single filers) or $3,000 (joint filers) from their income for contributing to the education savings account last year. Consult schedule M1529 for the details.

• First-time Homebuyers Savings Account – Minnesotans now can save up for their first homes and enjoy tax-free interest along the way. Beginning in 2017, any state resident can accumulate as much as $14,000 a year ($28,000 for a married couple) in a special savings account designated for buying a new or existing single-family home. At tax time, the interest can be subtracted from Minnesota income. (Any federal taxes on the interest still apply, of course.) Here’s an important detail. Although the account is labeled “first-time,” Minnesota Revenue says residents who have not owned a “principal residence” for at least three years actually are eligible. See Minnesota Schedule M1HOME for more details.

As the tax season proceeds, we at EricJohn Ltd. can help with the news on the Minnesota tax front!

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