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Qualify for new Minnesota tax breaks? Wait to file returns, state officials say

Minnesota Revenue Commissioner Myron Frans updates reporters Monday, March 24, 2014, about income tax changes lawmakers passed Friday. He said Minnesotans who may qualify for new deductions should wait until April 3 to file returns. (Forum News Service photo by Don Davis)

ST. PAUL -- Minnesota revenue officials will not be ready to provide refunds to Minnesotans who qualify for newly enacted tax breaks until April 3.

Revenue Commissioner Myron Frans today advised Minnesotans who may qualify for one of 10 new individual income tax breaks not to file income tax returns until then. He said that is when tax preparers, software companies and the state Revenue Department should be ready.

Taxpayers who do not qualify for the new tax breaks should go ahead and file returns, he added.

"About 1 in 10 taxpayers probably will be able to benefit," he said, meaning that up to 275,000 people will split the $49 million in new tax breaks.

Minnesotans who already have filed their returns and qualify for the new breaks do not need to do anything, Frans said. The Revenue Department will contact them and let them know about their new, and bigger, refunds and whether they need to file an amended return.

However, Frans said, the department does not know how soon employees will be able to comb through returns to find those who are owed bigger refunds.

In many cases, Revenue Department employees hope to make changes themselves and increase refunds. In other cases, the department will notify taxpayers they must file an amended return to take advantage of the law.

"This is a very complex task we are undertaking," Assistant Revenue Commissioner Terri Steenblock said.

The tax bill lawmakers passed and Gov. Mark Dayton signed Friday set aside $1 million for the department to undertake the job.

Tax returns must be filed by April 15.

New and newly expanded state income tax cuts are:

  • Working family credit: New law moves the credit closer to the federal earned income tax credit for families earning $25,000 to $40,000 annually.
  • Mortgage insurance deduction: Minnesotans making less than $110,000 a year may deduct mortgage insurance premiums.
  • Mortgage debt forgiveness exclusion: Homeowners whose mortgage lenders agreed to accept less than they owed on their homes may exclude the amount of debt the lender forgave.
  • Educator expenses deduction: Kindergarten through 12th grade school employees who buy classroom supplies with their own money may deduct up to $250 of the purchases.
  • Higher education tuition deduction: Those who paid tuition and fees to a post-secondary school may be able to deduct up to $4,000 if income is below $80,000 for individual returns or $155,000 for joint returns.
  • Student loan interest deduction: Students may be able to deduct up to $2,500 of student loan interest if returns show incomes below $75,000 for individual returns or $155,000 for joint returns.
  • Education savings account exclusion: Taxpayers with a child in grades K-12 who used distributions from a Coverdell Education Savings Account may exclude those payments from income.
  • National Health Corps scholarship exclusion: Taxpayers who received a National Health Service Corps scholarship or Armed Forces Health Professions scholarship and financial aid may be able to exclude those payments from income.
  • Employer-provided education, adoption and transit assistance exclusion: Those whose employers provide education, adoption and transit assistance may be able to exclude some of those benefits from income.
  • Tax-free individual retirement account exclusion: Taxpayers 70.5 years old and older who donate to charities from their IRAs may exclude up to $100,000 from income.

More information is available at Click on the orange "tax law changes" button to reach a page with several fact sheets.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.