Minnesota taxpayers now are discovering that what works on their federal income tax returns doesn’t always work on state returns. There is an unusual disconnect between the two systems this tax season. In short, the federal government made sweeping changes that began in the 2018 tax year, and Minnesota’s government hasn’t yet coordinated with them as it has in the past.
The result? Minnesotan and their tax preparers now are dealing with numerous adjustments and some extra forms to undo those federal changes when filing state returns.
Let’s take a couple of examples that affect most taxpayers. The tax reforms in the new federal Tax Cuts and Jobs Act doubled the past standard deduction and dropped personal exemptions for individuals. (The new standard deduction for singles is $12,000; for married taxpayers, it’s $24,000.)
Minnesota didn’t change either of those basic allowances. So, a single individual can count on an automatic $6,500 deduction from income and a married couple receives a $13,000 standard deduction. Each person also is entitled to a personal exemption of $4,250.
However, for some Minnesotans, it’s still practical to lower taxes by claiming itemized deductions instead of the standard deduction. That’s less likely on federal taxes, because of its higher standard deduction. So, the Minnesota Department of Revenue created a new form , Schedule M1SA, to allow itemized deductions. (Yes, you can use it even if you took the standard deduction for the federal return.)
On another schedule, Form M1NC, taxpayers must reconcile about 25 types of income or deductions that differ between state tax codes and the new federal law.
For a much more complete listing of Minnesota’s updates, go online to: https://www.revenue.state.mn.us/Pages/Tax-Law-Changes-FAQs.aspx
Also check into “Tax Law Changes” button on the Minnesota Department of Revenue’s main site, https://www.revenue.state.mn.us/Pages/default.aspx
The phrase “For Minnesota purposes” is meaningful this year. Eric Buechler, owner of tax preparation firm EricJohn Ltd. can take on those differences between Minnesota and federal tax codes for you this season.