Minneapolis – In less than two weeks, Minnesotans can start filing their income taxes before the April 15 deadline. Last legislative session, lawmakers agreed $3 billion plan This includes tax relief for seniors and low- and middle-income families.
Here’s what you need to know before tax filing season begins on January 29.
Debit checks will be taxed by the IRS
About 2.1 million Minnesotans qualified for a one-time rebate check, part of the massive $17.6 billion budget surplus that lawmakers had to deal with during the 2023 session.
The rebates were $260 per single tax filer, $520 for married couples filing jointly plus an additional $260 per dependent of up to three people — so a family of five saw up to $1,300 in their pockets if they met the income requirements .
Married couples filing jointly making less than $150,000 a year and other tax filers making less than $75,000 a year were eligible for a one-time refund.
When it comes tax time, Minnesotans won’t owe any state taxes on those payments, but they do owe money to the IRS. That’s because lawmakers approved the rebates nearly two weeks after the federal coronavirus emergency ended; Before that deadline, the payments would have remained harmless.
That angered Gov. Tim Walz, who pressured the IRS to reconsider. U.S. Rep. Pete Steuber, a Republican who represents Minnesota’s 8th District, also pressed federal tax officials to find a remedy.
But for now, depending on the size of the discount, expect to pay up to $26 or up to $286 for Uncle Sam.
Child tax credit
What Democrats in charge of the Legislature hailed as the “centerpiece” of their tax bill is a child tax credit for low-income families that researchers at Columbia University predict could cut child poverty in Minnesota by a third.
The credit is $1,750 per child and begins to phase out for families making more than $35,000 per year.
If Minnesotans make more than that, they may qualify for a smaller credit depending on their income and how many children they have. There is no limit to the number of eligible children a family can claim.
The new tax law also made amendments to the existing working family credit. The changes tie the two accreditations together and the phase-out timeline is the same. For example, a couple filing jointly with three children under the age of 18 would receive a maximum credit of $5,600. It has been phased out entirely for people earning more than $81,666 a year, according to a nonpartisan research team at the Minnesota Legislature.
An estimated 265,000 families will be affected by the new loan. Minnesotans can still get the credit even if they’re not legally required to file a tax return — the Department of Revenue estimates that 10-15% of eligible households are in this situation. But they must submit an application to claim the balance.
Most recipients of the new child tax credit qualify for free tax preparation services and can file for free, according to an administration spokesperson.
The credit will come as part of their refund.
Social Security tax deductions
Retired couples earning up to $100,000 and individuals earning up to $78,000 will pay no state taxes on their Social Security benefits starting in tax year 2023. Half of the state’s seniors have not already paid state taxes on those benefits. DFL tax leaders said during the hearing that the change would increase that number to 76%.
In 2022, Republican and Democratic leaders in the divided Legislature reached an agreement to eliminate the entire state tax on Social Security, regardless of income. But that deal collapsed before the session ended. The case was postponed to the 2023 session.