The 2017 legislative session resulted in a number of changes to Minnesota tax laws. Here’s a brief summary of the some of these changes which are effective for the 2017 tax year unless otherwise noted. If you desire further information, please contact us.
- Contributions to Section 529 college savings plans
- Credit – 50% of contributions up to maximum of $500. Fully phased out for single filers at $100,000 of AGI and married filing joint filers at $160,000.
- Subtraction – Allows taxpayer to deduct up to $1,500 ($3,000 for married joint filers) of contributions to any state’s section 529 college savings plan or prepaid tuition plan. Subtraction excludes amount that are rolled over from other college savings plans. Subtraction is limited to taxpayers who do NOT claim the credit. There is no phase out for this deduction.
- Recapture tax – additional tax imposed on distributions from plan accounts not used for qualified higher education expenses. Tax is assessed based on previous credits or subtractions taken in previous years.
- Social Security subtraction – equals the lesser of Social Security benefits or a maximum as follows (subtraction for MFJ filers will phase out at $99,500):
|Married Filing Joint/Surviving Spouse||Single/HOH||Married Filing Separate|
|$4,500 Maximum||$3,500 Maximum||$2,250 Maximum|
|Reduce by 20% over $77,000||Reduce by 20% over $60,200||Reduce by 20% over $38,500|
3. Other new subtractions/credits:
- Subtraction for earnings on first time home buyer accounts
- Subtraction for discharge of debt on student loans with income-based repayment plans
- Credit for K-12 teachers who complete master’s degree in their field of licensure (maximum $2,500)
- Credit for principal and interest payments on student loans (maximum $500)
4. Estate Tax – Minnesota’s new filing requirements for estate tax purposes are as follows:
- 2017 – $2,100,000
- 2018 – $2,400,000
- 2019 – $2,700,000
- 2020 and thereafter – $3,000,000
- Sales Tax changes include:
- Effective October 1, 2017 Hennepin and Ramsey County Transit Sales and Use tax (which replaces the Transit Improvement Sales and Use tax) will increase from .25% to .50%.
- Duty to collect and remit sales tax extended to Internet marketplace providers located in the state unless sellers on the marketplace site are already collecting the tax. Effective July 1, 2019 or earlier if the Supreme Court or congress allows for collection of sales tax on remote sellers.
- Provides a definition of real property to be used in determining when sales tax is due on construction and installation contracts.
- Property Tax changes effective with taxes payable in 2018 include:
- Exempting the first $100,000 of commercial-industrial property from the state general tax.
- Freezing the state general tax at the 2018 level.
- Research Credit – increases second tier rate from 2.5% to 4%.
- Pass-through Entities – accelerates individual income tax on installment sales of pass-through entities for nonresidents or residents who move out of Minnesota.
- New Nonrefundable Credits – effective tax year 2018:
- Credit for sale or rental of assets to beginning farmers.
- Credit for beginning farmers who take financial management courses (maximum $1,500).
- Sales Tax changes include: