Filing Requirements (Income Tax)

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2 Filing Requirements (Income Tax) Based on the taxpayer s filing status, age, and gross income. Flipchart - 2 Filing Status Age Gross Income Single Under or older Married Filing Joint* Under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses) $10,400 $11,950 $20,800 $22,050 $23,300 Married Filing Separate Any age $4,050 Head of Household Under or older Qualifying Widow(er) Under or older $13,400 $14,950 $16,750 $18,000 * Married Filing Joint taxpayers not living with their spouse at the end of the tax year with a minimum of $4,050 of gross income must file a return regardless of age. Minnesota Residents: Must file a Minnesota return if they are required to file a federal return. Part-year and Nonresidents: Must file a Minnesota return if their Minnesota-source income is $10,400 or more. FILING/AGE REQUIREMENTS/ GROSS INCOME IRS MN

3 Flipchart - 3 Self-Employed Self-employed taxpayers must file if they had net earnings of $400 or more. Carry on a trade or business as a sole proprietor An independent contractor Member of a partnership In business for themselves Dependent (single and under 65) A dependent must file a return if any of the following apply: Unearned income is over $1,050 Earned income is over $6,350 Gross income exceeds the larger of these amounts: o $1,050 o Earned income (up to $6,350) plus $350 Dependent (65 or older, blind, or married) See IRS Publication 17 or tax form instruction booklet.

4 Age Requirements Age What can be done 70 1 / May be required to make IRA withdrawal (traditional) Cannot use 1040EZ Can claim an additional standard deduction for 65 or older Can claim Credit for Elderly (Schedule R and M1R) Cannot receive Federal Earned Income Tax Credit without a qualifying child > 59½ Can make IRA withdrawal without additional tax >25 but < Can claim Federal Earned Income Credit with no dependents < Qualifies as a dependent if a full-time student (part of at least five months) > Can be a child care provider for a relative if not a dependent < Can include child s income on parent's return < Can be a qualifying child for Child Tax Credit < Can claim Child and Dependent Care Credit (both IRS and MN) < Can claim Child and Dependent Care Credit for own child if they are a provider (MN only) Flipchart - 4

5 Gross Income Use this list as a guide for determining the taxpayer s filing requirement. Note: It is not a cumulative list. Include in income: Alimony received Annuities Awards Back pay Bonuses Breach of contract damages Business income Capital gain distributions Commissions Compensation for personal services Debts forgiven Disability benefits (employer funded) Dividends Employee Awards and bonuses Estate and trust income Farm income Fees Gain from sale of property/securities Gambling winnings Hobby income Interest IRA distributions (traditional) Jury duty fees Military pay and pension Notary fees Original issue discount Partnership income (taxpayer s share) Pensions Prizes Railroad retirement Tier I and II (equivalent to Social Security) Rents (gross rent) Rewards Royalties Scholarships and Grants (see Form 1040 instructions) Severance pay Social Security payment (Form SSA-1099 not SSI) Profit from stock sale (Form 1099-B) Supplemental unemployment benefits Tips and gratuities Unemployment compensation Wages and Salaries Flipchart - 5

6 Exclude from income: Child support Death payments (see Form 1040 instructions) Dividends on life insurance Federal Employees Compensation Act payments Gifts, bequests, and inheritances (but not income from them) Insurance proceeds (generally) o Accident o Casualty o Health o Life Interest on insurance dividends left with Veterans Benefits Administration Interest on tax-free securities Meals and lodging for the convenience of employer (see Form 1040 instructions) Public benefit payments (General Assistance, MFIP, and similar programs) Relocation payments Supplemental Security Income (SSI) Veterans benefits Workers compensation or payments in lieu of workers compensation Flipchart 6

7 Filing Status Flipchart - 7 Taxpayers must use the same filing status on their Minnesota return as they used on their federal return. 1. Single Unmarried or legally separated as of December 31, Married Filing Joint Married as of December 31, 2017 Include both incomes Both must sign return Both responsible for tax payment 3. Married Filing Separate... Married as of December 31, 2017 Report own income Provide name and SSN of spouse If one itemizes, both must itemize 4. Head of Household The taxpayer must meet all of the following requirements to file head of household: Unmarried or considered unmarried on the last day of the tax year. Paid more than half of the cost of keeping up a home for the year. A qualifying person resided in taxpayer s home for more than half of the year. o Exception: If the qualifying person is the taxpayer s parent, they are not required to reside in the taxpayer s home. An individual is not the taxpayer s qualifying person solely because: He or she lived with the taxpayer for the entire year. The taxpayer is entitled to claim the individual as a dependent under a multiple support agreement. FILING STATUS/EXEMPTIONS IRS MN

8 Flipchart Head of Household (continued) Married Child: If a qualifying person is married at the end of the year, both of the following must apply for the individual to be the taxpayer s qualifying person for head of household: The individual cannot file a joint return, unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns. The individual must be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. An exception applies to certain adopted children. 5. Qualifying Widow(er) with Dependent Child The taxpayer must meet all of the following requirements to file as a qualifying widow(er): Must have been entitled to file jointly in the year of the spouse s death. Has a qualifying child who lived in the home the entire tax year. Has not remarried within two years of the spouse s death. Paid more than half of the cost of keeping up a home for the year. o May be eligible to use this status up to two years after the spouse s death. Exemptions The exemption is $4,050 each for the taxpayer, spouse, and any eligible dependents. Exemption amounts phase out as AGI exceeds the following thresholds: 2 exemptions $8,100 3 exemptions $12,150 4 exemptions $16,200 5 exemptions $20,250 No additional personal exemption for age or blindness (For details, see the Additional Standard Deduction section). No exemption for individuals who are, or could be, claimed as a dependent on someone else s return.

9 Dependents A dependent is either a qualifying child or a qualifying relative. Flipchart - 9 Qualifying Child In general, a qualifying child must meet all of the following conditions: The child must be the taxpayer's child (including an adopted child, stepchild, or eligible foster child), sibling, stepsibling, or a descendant of any of them. The child must have lived with the taxpayer for more than half of An exception may apply for temporary absences, children of divorced or separated parents, or children who were born or died in the tax year. At the end of 2017, the child must be under age 19, under age 24 if a full-time student, or permanently and totally disabled (any age). The child must not have provided over half of his or her own support in The child is not filing a joint return (unless the return is only filed for a refund). Qualifying Relative In general, a qualifying relative must meet all of the following conditions: The person cannot be the qualifying child of another person in The person must be either a relative or any other person (where the relationship does not violate local law) who lived in the home the entire year as a member of the household. The person must have gross income of less than $4,050. If the person is permanently and totally disabled, certain income from a sheltered workshop may be excluded for this purpose. The taxpayer must have provided over half of the person s support in Exceptions apply, in certain cases, for children of divorced or separated parents and for a person supported by two or more taxpayers.

10 Flipchart - 10 Additional Rules for Dependents 1. Dependents of another person cannot claim any dependents on their own return. 2. Dependents who are married cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns. 3. Dependents generally must be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. 4. Tie-breaker rules, shown in the table below, apply if a child is a qualifying child for multiple people and more than one claims the child as a dependent. In this situation: One person is the child s parent Two people are the child s parent None of the people are the child s parent The child will be treated as the qualifying child of the: Parent Parent with whom the child lived for the longer period of time Parent with the highest AGI (if the child spent equal time with each) Person who can claim the qualifying child of another taxpayer so long as that person s AGI is higher than the highest AGI of any parent of the qualifying child

11 Income and Adjustments Types of income subject to tax: Wages, salaries, and tips Interest (if over $1,500, attach a completed Schedule B) o Bank accounts o Credit union accounts, bonds (not municipal) o Loans and notes receivable Dividends (if over $1,500, attach a completed Schedule B) State tax refund, if the taxpayer itemized last year (see worksheet in Form 1040 instructions) Alimony received Business income or loss (attach a completed Schedule C or Schedule E) Capital gain or loss (attach a completed Schedule D or Form 4797) Pensions, annuities, IRAs, Tier II Railroad Retirement benefits Rents, royalties, partnerships, etc. Farm income or loss (attach a completed Schedule F) Unemployment compensation Social Security or equivalent Tier I Railroad Retirement benefits Prizes, awards, gambling winnings, jury duty fees, and election board payments Scholarships and fellowships (exclude payments for tuition, fees, books, and supplies) Flipchart - 11 INCOME/ADJUSTMENTS IRS

12 Adjustments to income: Flipchart - 12 Certain expenses of military reservists (attach a completed Form 2106) Health savings account deduction (attach a completed Form 8889) Moving expenses (attach a completed Form 3903) One-half of self-employment tax (attach a completed Schedule SE) Self-employed SEP, SIMPLE, Keogh, and qualified plan contributions Self-employed health insurance deduction Penalty on early withdrawal of savings Alimony paid (must list recipient s Social Security number) IRA contributions (maximum of $5,500 or, if age 50 or older, $6,500) o Eligible to contribute only if less than 70½ years old o Allowable deduction phases out, based on MAGI between the following levels: $62,000 - $72,000 if single $62,000 - $72,000 if head of household $99,000 - $119,000 if married filing joint (and both spouses are covered by a retirement plan) $99,000 - $119,000 if qualifying widow(er) $0 - $10,000 if married filing separate If the taxpayer did not live with their spouse at any time during the year, then the filing status is considered to be single Student loan interest (maximum of $2,500 for all except MFS and limited by MAGI) At the time of publication, the tuition and fees deduction does not apply for tax year Congress may retroactively extend this adjustment to income for tax year 2017.

13 Standard Deduction Filing Status Standard Deduction Flipchart - 13 Single $6,350 Married Filing Joint $12,700 Qualifying Widow(er) $12,700 Married Filing Separate $6,350 Head of Household $9,350 Filing Status Standard Deduction (65 or older or blind) Single or older or blind $7, or older and blind $9,450 Married Filing Joint, or.... One 65 or older or blind $13,950 Qualifying Widow(er) One 65 or older and blind $15,200 Both 65 or older or blind $15,200 Both 65 or older and blind..... $17,700 Head of Household or older or blind $10, or older and blind $12,450 Married Filing Separate or older or blind $7, or older and blind $8,850 Standard Deduction for Married Filing Separate: If one spouse itemizes, the other spouse must: File a return if their gross income is greater than $5. Itemize their deductions. (The allowable standard deduction is $0.) Standard Deduction for Dependents: The standard deduction of someone who is claimed as a dependent on someone else s return is limited to the greater of $1,050 or the dependent s earned income (up to $6,350) plus $350. STANDARD DEDUCTION IRS

14 Itemized Deductions Flipchart - 14 A. Medical and Dental - Allowable only to the extent they exceed 10% of AGI. B. Taxes - State and local income tax (for example, withholding, estimated and regular state income taxes paid during the calendar year), allowable amount from a car license (registration tax minus $35), and net real estate taxes (the amount paid to a county minus the property tax refund received in the tax year). C. Interest - There is no deduction for personal interest expenses (car loans, credit cards, etc.). Mortgage Interest - The taxpayer may generally deduct all the interest on debt secured by their main or second home (not to exceed the fair market value of residence) in any of the following situations: The debt, regardless of amount, was incurred on or before October 13, 1987, and was not refinanced after. The debt is not more than $1,000,000 ($500,000 if married filing separate), provided they used the proceeds to buy, build, or substantially improve the home. The debt was not used for the purpose in (2), but it is $100,000 or less ($50,000 or less if married filing separate). D. Contributions - Charitable contributions made to qualifying organizations by cash, check, or non-cash methods for which the taxpayer has receipts. The contribution amount must be limited by any amount of benefit received and may be limited by the taxpayer s income. E. Miscellaneous Deductions Subject to 2% of AGI limitation: Unreimbursed employee expenses: job education expenses, job travel, professional/union dues, etc. Office-in-home expenses of employees Tax preparation fees Safe deposit box rental Not subject to the 2% of AGI limitation: Gambling losses (to the extent of winnings) Work-related expenses for individuals with a disability Itemized deductions do phase out as income exceeds certain thresholds. Refer to IRS Publication 17 for more information on allowable itemized deductions. ITEMIZED DEDUCTIONS IRS

15 Credits Nonrefundable credits are only allowed up to the amount of total tax liability. Refundable credits are allowed in full and may result in the taxpayer receiving a refund. Nonrefundable Credits Nonrefundable credits are applied in the order they are listed on federal Form Child and Dependent Care Credit (attach a completed Form 2441) Credit may be refundable on Form M1 (check instructions for Schedule M1CD). Flipchart - 15 To qualify, a taxpayer must: 1. Make payments for the care of a qualifying person (either of the following): o A qualifying child under age 13 when the care was provided. o A spouse or other person who was not physically or mentally able to care for themselves and lived with you more than half the year. 2. Have earned income during the year (unless a full-time student or physically or mentally unable to care for themselves). 3. Pay care expenses so the taxpayer (and spouse, if filing jointly) can work or look for work. 4. Make payments to an individual who cannot be claimed by the taxpayer as a dependent. o For payments to the taxpayer s child, the child must be 19 or older and not claimed as a dependent. o Payments cannot be to the taxpayer s spouse or the parent of the qualifying person. 5. NOT file married filing separate. 6. Identify the name, address, and taxpayer ID number of the child care provider. Allowable amount of credit is calculated by: 1. Figuring the least of the taxpayer s (or spouse s): earned income actual expenses paid $3,000 (for one qualifying person) or $6,000 (for two or more qualifying persons)* 2. Limiting the result from step 1 by a percentage of AGI as calculated by the table included on Form The total nonrefundable credit is the lesser of step 2 or the taxpayer s overall tax liability. * This amount must be reduced by any proceeds from an employer s dependent care assistance program that are excluded from income. CREDITS IRS

16 Flipchart - 16 Lifetime Learning Credit (attach a completed Form 8863) Do not claim the credit for any student for whom you are also claiming the American Opportunity Credit. To qualify, a taxpayer must: 1. Incur qualified expenses, including tuition and fees and course-related books, supplies, and equipment. o Reduce the expense amount by any refunds or tax-free assistance received. 2. Be enrolled in any year of postsecondary education or courses to acquire or improve job skills o Student does not need to be pursuing a degree. o No limit to the number of years the credit can be claimed. 3. Be enrolled in at least one class. 4. Pay qualified expenses in 2017 for academic periods starting in 2017 or the first three months of NOT file married filing separate, be a dependent, or be a nonresident alien. Allowable amount of credit is calculated by: 1. Figuring 20% of the lesser of actual qualified expenses or $10, Applying an income phase out of $131,000 for Married Filing Joint or $65,000 for all other filing statuses. 3. The total nonrefundable credit limited to $2,000 or taxpayer s overall tax liability. Child Tax Credit Taxpayers with a limited Child Tax Credit should see if they also qualify for the refundable Additional Child Tax Credit (see page 19 for information about the Additional Child Tax Credit). To qualify, a taxpayer must: Have at least one qualifying child who is both: o Claimed as a dependent (following all qualifying child rules) on the taxpayer s return o Under age 17 at the end of 2017 Allowable amount of credit is calculated by: 1. Applying an income phase-out based on the difference between MAGI and phase-out amounts based on filing status ($110,000 Married Filing Joint, $55,000 Married Filing Separate, and $75,000 all others). 2. The total nonrefundable credit is limited to $1,000 (or limited amount from step 1) per qualifying child or taxpayer s overall tax liability.

17 Credit for the Elderly (attach a completed Schedule R) To qualify, a taxpayer must: 1. Be 65 or older, or under 65 and meet all the following requirements: o Retired on permanent and total disability o Have not met mandatory retirement age o Have received taxable disability benefits in Be a U.S. citizen or resident alien. 3. NOT file married filing separate, unless they lived apart from their spouse the entire tax year. Flipchart - 17 Qualifying Income Limits Even if the taxpayer qualifies based on the rules above, they do not qualify for the credit if their income is greater than the amounts listed below: Filing Status AGI OR Total Nontaxable Income* Single, Head of Household, $17, $5,000 or Qualifying Widow(er) Married Filing Joint One qualifying spouse $20, $5,000 Two qualifying spouses $25, $7,500 Married Filing Separate $12, $3,750 (meets rule in step 3 above) * Nontaxable Social Security and other nontaxable pensions, annuities, or disability income. Allowable amount of credit is calculated by: Determining the lesser of 15% of the credit calculated on Schedule R or the taxpayer s overall tax liability.

18 Refundable Credits Earned Income Credit (attach a completed Schedule EIC) Rules for all taxpayers: 1. Taxpayer (and spouse) and qualifying child must have valid Social Security numbers. 2. Taxpayer (and spouse) must be a U.S. citizen or resident alien for the entire year. 3. Filing status cannot be married filing separate. 4. Investment income must be less than $3, Cannot file Form 2555 relating to foreign earned income. 6. Adjusted gross income must be less than: o $15,010 ($20,600 if married filing jointly) if no qualifying child o $39,617 ($45,207 if married filing jointly) if one qualifying child o $45,007 ($50,597 if married filing jointly) if two qualifying children o $48,340 ($53,930 if married filing jointly) if three or more qualifying children Flipchart - 18 Rules with a qualifying child: 1. Child must meet relationship, age, and residency tests (see below). 2. Qualifying child cannot be used by more than one person to claim the earned income credit. 3. Filer cannot be a qualifying child of someone else. Rules with no qualifying child: 1. Must be at least 25 years old but under age 65 at the end of Cannot be the qualifying child or dependent of another person. 3. Must live in the U.S. more than half the year. Relationship, Age, and Residency Tests 1. Relationship: Must be a child, stepchild, foster child, sibling, stepsibling, half-sibling, or a descendant of any of them. Note: A married child must be claimed as a dependent to qualify. 2. Age: At the end of 2017, must be under age 19, be under age 24 and a full-time student, or be permanently and totally disabled (any age). 3. Residency: Must have lived with the taxpayer in the main home, in the U.S., for more than half the year in 2017.

19 Flipchart - 19 Additional Child Tax Credit (attach a completed Form 8812) A refundable credit for individuals who get less than the full amount of the Child Tax Credit; based on the taxpayer s limited Child Tax Credit amount in excess of the allowed credit amount. Individuals who have three or more children follow a different calculation. o See Form 8812 for a detailed description of the calculation. American Opportunity Tax Credit (attach a completed Form 8863) To qualify, a taxpayer must: 1. Incur qualified expenses, including tuition and fees and course-related books, supplies, and equipment. o Reduce the expense amount by any refunds or tax-free assistance received. 2. Be in ONLY the first four years of post-secondary education (including time the Hope Credit was claimed): o Student must be pursuing a degree or other education credential. o Only available for four years per eligible student. 3. Be enrolled with at least half-time credits for at least one academic period during Pay qualified expenses in 2017 for academic periods starting in 2017 or the first three months of NOT file married filing separate or be a dependent or nonresident alien. Allowable amount of credit is calculated by: 1. Allowing 100% of the first $2,000, and 25% of the next $2,000, of qualified expenses. 2. Applying an income phase-out of $180,000 for Married Filing Joint or $90,000 for all other qualifying statuses. 3. The total refundable credit limited to $2,500 per eligible student or taxpayer s overall tax liability. Adoption Credit The taxpayer may qualify for a tax credit of up to $13,460, subject to income limitations, for qualified expenses paid to adopt an eligible child. (Refer to IRS Publication 17 for details.)

20 Minnesota Income Modifications Minnesota Additions to Income Line 2: State Income Tax or Sales Tax Addition If the taxpayer claimed an amount on Schedule A for state income or sales tax, it must be added back to income. 1. Total itemized deductions from Schedule A, Line Enter amount from table on page 11 of M1 Instructions Subtract step 2 from step State income or sales tax from Schedule A, Line 5 and any additional state income tax (e.g. property taxes) included on Schedule A, Line Enter the lesser of step 3 or step 4 on Form M1, Line 2. Taxpayers who did not itemize deductions should skip Line 2. Flipchart - 20 Line 3: Other Additions to Income (attach a completed Schedule M1M) Line 1: Excess itemized deductions Line 2: Phase out of personal exemption(s) for adjusted gross income that exceeds the applicable threshold Line 3: Interest from municipal bonds of another state or its governmental units Line 4: Federally tax-exempt dividends from mutual funds investing in bonds of another state Line 14: New! Non-qualified first time homebuyer addition (attach a completed Schedule M1HOME) See the Schedule M1M instructions for more details. MINNESOTA MODIFICATIONS MN

21 Flipchart - 21 Minnesota Subtractions from Income Line 5: State tax refund Include in Minnesota taxable income the amount the taxpayer included on Form 1040, Line 10. o If there is no amount on Line 10, leave it blank. Line 6: Other Subtractions from Income (attach a completed Schedule M1M) Line 18: Net interest or mutual fund dividends from U.S. bonds Line 19: Education expenses paid for qualifying children in grades K-12 (see page 26 for more details) Line 20: Charitable contribution deduction for taxpayers who did not itemize and contributed more than $500 Line 23: Subtraction for persons age 65 or over or permanently and totally disabled (see page 22 for more details) Line 24: Benefits from the Railroad Retirement Board included in federal taxable income Line 25: Residents of reciprocity states filing Form M1 only to receive a refund for all Minnesota tax withheld Line 26: Earned income of American Indians who worked and lived on a reservation Line 27: Federal active duty military pay received for services performed while a Minnesota resident Line 28: Income earned as a member of the Minnesota National Guard or Reserves Line 29: Active duty military pay while a resident of another state to the extent the income is federally taxed Line 30: Unreimbursed travel and lodging expenses and lost wages net of sick pay for an organ donor Line 32: Military pension or other retirement pay computed under Title 10 Line 34: Post service education awards from AmeriCorps Line 38: Subtraction for excess itemized deduction limitation Line 39: New! Subtraction for contributions to a qualified education savings plan Line 40: New! Social Security subtraction Line 41: New! Subtraction for interest earned from a designated first-time homebuyer savings account Line 42: New! Subtraction for discharge of indebtedness of educational loans See the Schedule M1M instructions for more details.

22 Line 23, Schedule M1M: Age 65 or Older/Disabled Subtractions (attach a completed Schedule M1R) Flipchart 22 To qualify, a taxpayer (or spouse if filing joint) must either: 1. Be 65 years old by the end of Have a permanent and total disability, and have received federally taxable disability income in Qualifying Income Limits Even if the taxpayer qualifies based on the rules above, they do not qualify for the credit if their income is greater than the amounts listed below: Filing Status Adjusted AND Railroad Board Benefits and Gross Income* Nontaxable Social Security Married Filing Joint One spouse is 65+ or disabled $38, $12,000 Both spouses are 65+ or disabled $42, $12,000 Married Filing Separate** 65+ or disabled $21, $6,000 Single, Head of Household Or Qualifying Widow(er) 65+ or disabled $33, $9,600 *Adjusted gross income, plus any lump-sum distribution, less any taxable Railroad Retirement Board benefits. **MFS status is allowable only if the taxpayer lived apart from his or her spouse for the entire year.

23 Individual Nonrefundable Credits Line 16: Marriage Credit (attach a completed Schedule M1MA) Flipchart 23 To qualify, both taxpayers must: 1. File a joint return. 2. Have taxable earned income, taxable pensions, or taxable Social Security income. o Earned income includes (but is not limited to): wages, salaries, tips, earnings from self-employment*, farm income*, and some K-1 income*. 3. Have a minimum of $38,000 on Form M1, Line Verify the lesser-earning spouse s income is at least $23,000. *Reduce the amount of net income by half of the Self-Employment Tax subtraction. How to calculate the allowable amount of credit: For couples where both spouses income is less than $101,000, use Schedule M1MA, Lines 6 and 7 to find the allowable, nonrefundable credit in the table located in the Schedule M1MA instructions. Line 17: Credit for Income Tax Paid to Another State (attach a completed Schedule M1CR or M1RCR) To qualify, a taxpayer must: 1. Be a full-year or part-year domiciliary of Minnesota in Pay 2017 state income tax on the same income in both Minnesota and another state. o The taxpayer must file a separate M1CR for each state where the income was taxed twice. 3. Complete and file the return for the other state to determine that tax liability. See Schedule M1CR or Schedule M1RCR instructions for more information regarding the calculation. Do not use Schedule M1CR to report taxes paid to Wisconsin or M1RCR for any state other than Wisconsin. Line 18: Other Nonrefundable Credits (attach a completed Schedule M1C) Credit for long-term insurance premiums (attach a completed Schedule M1LTI) Credit for past military service Credit for increasing research activities (attach a completed Schedule KPI, KS, or KF) Employer transit pass credit (attach a completed Schedule ETP) Alternative minimum tax credit (attach a completed Schedule M1MTC) SEED Capital Investment Credit New! Education Savings Account Contribution Credit (attach a completed Schedule M1529) New! Credit for Attaining Master s Degree in Teacher s Licensure Field (attach a completed Schedule M1CMD) New! Student Loan Credit (attach a completed Schedule M1SLC) PAYMENTS AND CREDITS MN

24 Payments Line 23: Minnesota Withholding (attach a completed Schedule M1W) If the taxpayer received W-2, 1099, or W-2G forms or Schedules KPI, KS, or KF with Minnesota income tax withheld, attach a completed Schedule M1W. o Be sure to only include Minnesota withholding on Schedule M1W. Flipchart 24 Line 24: Estimated Tax Payments Only three types of payments are includable on Line 24: Total 2017 Minnesota estimated payments made in 2017 or 2018, either paid by check or electronically. The portion of the 2016 Form M1 refund designated to be applied to 2017 estimated tax. Extension payments made by the regular due date for a late-filed return, either by check or electronically. Individual Refundable Credits (Line 25: attach a completed Schedule M1REF) Child and Dependent Care Credit (attach a completed Schedule M1CD) To qualify, a taxpayer must: 1. Have federal adjusted gross income of less than $62,000 with one qualifying person or less than $74,000 with two or more qualifying persons. 2. NOT file married filing separate. 3. Have had the qualifying person living with them for more than half of the year. Day Care Providers can claim a child care credit if they care for their own child when the child has not reached age 6 by the end of the tax year. If the child is 16 months or younger at the end of 2017, the credit is based on $3,000 of qualifying expenses* ($6,000 if there are two children under age 16 months). If the child is over 16 months of age but less than age 6 at the end of the year, the credit is based on the amount the provider would charge to care for a child of the same age in their home. A child born in 2017 may be a qualifying person for married filing joint taxpayers who birthed or adopted a child born in 2017, even if they paid no child care expenses. The credit for a child born in 2017 is based on the lesser of $3,000 of qualifying expenses* or the taxpayers combined earned income. The taxpayers cannot participate in a pre-tax dependent care assistance program. The allowable credit is refundable. A Form 2441 should be completed for calculation purposes, whether or not the credit was filed federally, to qualify for the Minnesota Child and Dependent Care Credit. *Allowed even if actual dependent care expenses were not incurred or only one spouse had earned income.

25 Working Family Credit (attach a completed Schedule M1WFC) To qualify, a taxpayer must: 1. Be eligible for the federal Earned Income Credit.* 2. Be a Minnesota resident or have Minnesota-source income as a part-year resident. o The credit for part-year residents is apportioned based on Minnesota source income. o Nonresidents are not eligible for the credit. Flipchart 25 * See page 18 for the qualifications for the federal Earned Income Credit. K-12 Education Credit (attach a completed Schedule M1ED) To qualify, a taxpayer must: 1. Have a qualifying child as defined by the federal Earned Income Credit. o See page 18 for a description of the relationship, age, and residency tests. 2. Have household income below certain limits based on the number of qualifying children in grades K-12. Qualifying Children Household Income 1 or 2 $ 37,500 3 $ 39,500 4 $ 41,500 5 $ 43, $ 45,500 + $2,000 for each child above 6 3. Have paid for education-related expenses for qualifying children in grades K-12. o See page 26 for a list of qualifying expenses for the K-12 Education Credit and Subtraction. 4. NOT file married filing separate. Allowable amount of credit is calculated by: 1. Limiting qualifying expenses to 75% of the total amount. The remaining 25% cannot be used for the subtraction. 2. The total refundable credit is the lesser of $1,000 per qualifying child or 75% of the qualifying expenses.

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27 Flipchart 27 Credit for Parents of Stillborn Children (attach a completed Schedule M1PSC) Parents who experience the stillbirth of a child in Minnesota may be eligible for a refundable credit of $2,000. Taxpayers may qualify for this credit if: 1. They experienced the stillbirth of a child during the tax year after 20 weeks of gestation. 2. The Minnesota Department of Health issued a Certificate of Birth Resulting in Stillbirth for the child. 3. They would have been eligible to claim the child as a dependent. Refundable Credit for Taxes Paid to Wisconsin (attach a completed Schedule M1RCR) To qualify, a taxpayer must: 1. Be a full-year or part-year domiciliary of Minnesota in Pay 2017 state income tax on the same income in both Minnesota and Wisconsin. o The taxpayer must file a separate M1CR for each state where the income was taxed twice. 3. Complete and file the return for Wisconsin to determine that tax liability. See Schedule M1RCR instructions for more information regarding the calculation.

28 Line 12: Part-Year Residents and Nonresidents (attach a completed Schedule M1NR) Flipchart 28 All part-year and nonresidents must use Schedule M1NR to determine the amount of total income and deductions allocable to Minnesota in order to calculate their Minnesota tax liability. Form M1 must be completed through Line 11 to complete Schedule M1NR. A percentage of Minnesota source income to total income is applied to the calculated amount of tax from Form M1, Line 11. Filing and Payment Extensions For most taxpayers, the due date for filing and payment for Form M1 is April 15, 2018; however, returns received on or before April 17, 2018, will be considered timely. If a federal Form 4868 is filed with the IRS requesting a 6-month extension (until October 15) to file, then the Minnesota filing deadline is also automatically extended with no late-filing penalty. o Any estimated Minnesota tax liability must be paid by April 17, 2018, to avoid a late payment penalty even if the taxpayer has been granted an extension to file. There is no Minnesota extension to pay. o Submit a payment voucher with a check or go to to pay electronically online. PART-YEAR AND NONRESIDENTS/DUE DATES MN

29 Household Income Household income must be determined to calculate credits on Schedules M1ED and Form M1PR. Flipchart 29 Household Income includes (but is not limited to): Federal Adjusted Gross Income (FAGI) Nontaxable Social Security benefits (including amounts deducted for Medicare), Railroad Retirement Board benefits, and Retirement Survivors Disability Insurance o Do not include Social Security income for dependents Deductions on Federal Form 1040 for payments to an IRA, Keogh, Simplified Employee Pension (SEP), or SIMPLE plans Program payments received (Minnesota Family Investment Program (MFIP), Minnesota Supplemental Aid (MSA), Supplemental Security Income (SSI), Group Residential Housing (GRA), and General Assistance (GA)) Refugee cash assistance and emergency assistance Workers compensation Pre-tax contributions to an employee elective deferral plan such as a 401(k), 403(b), 457 deferred compensation, or SEP/SIMPLE plan (amount shown on Form W-2) Contributions made to a dependent care and/or medical health expense account (amount shown on Form W-2) Nontaxable employee transit and parking expenses or contributions to a section 125 cafeteria plan Veterans benefits Nontaxable scholarships, fellowships, grants for education, veterans education benefits, and qualifying tuition reduction, including those from foreign sources Federal subsidies paid to employers for providing prescription drug coverage for retired employees Nontaxable pension and annuity payments, including lump-sum distributions and disability payments o Do not include distributions received from any pension or annuity funded exclusively by the taxpayer AND for which contributions could not be taken as a federal tax deduction Income excluded by a tax treaty Lump-sum distribution reported on Schedule M1LS, Line 1 Federally nontaxed interest and mutual fund dividends Alimony or separate maintenance payments (but not child support payments) Reduction in rent for caretaking responsibilities o Difference between the actual rent and the amount the rent would have been if not the caretaker Housing allowance for military or clergy Nontaxable military earned income, such as combat pay Strike benefits Employer paid education or adoption expenses not included in FAGI Gain from the sale of the primary residence excluded from income To the extent they reduced FAGI include the following losses and deductions: o Capital loss carryforward o Net operating loss carryforward/carryback o Current year passive activity losses allowed under section 469 o Prior year passive activity loss carryforward claimed in 2017 for federal purposes o Health Savings Account (HSA), educator expense, Archer MSA, and domestic production activities deductions HOUSEHOLD INCOME MN

30 Household Income does NOT include: Minnesota property tax refunds Child support payments Dependent s income, including Social Security State income tax refunds not included on Form M1, Line 1 (federal taxable income) Dollar value of food, clothing, food stamps, and medical supplies received from government agencies Payments from life insurance policies Payments by someone else for the taxpayer s care by a nurse, nursing home, or hospital Fuel assistance payments IRA rollovers Gifts and inheritances Nontaxable Holocaust settlement payments Flipchart 30 Household Income for M1PR differs from the above in the following ways: Up to $5,500 ($11,000 for joint property tax return) of any combination of taxable or nontaxable retirement account contributions can be subtracted. All nontaxable distributions from a Roth IRA or other retirement account are added. For homeowners only, the income of persons, other than a boarder, dependent, renter, parent or spouse s parent for the period of time they lived with the taxpayer during the year. o Include a parent s income if they lived in the home, are not the taxpayer s dependent, and are co-owners. Household Income for Married or Separated Taxpayers filing Form M1PR: Married All Year Married During the Year (applying together) Married During the Year (applying separately) Divorced or Separated During.... the Year Renter Include all income of both spouses for the whole year; DO NOT include the income of any other persons in the household. Same as Married All Year. Include all of the taxpayer s income for the whole year PLUS the spouse s income for the time they were married; DO NOT include the income of any other persons in the household. Include all of the taxpayer s income for the whole year PLUS the spouse s income for the time they were married; Apply for separate refunds. Homeowner Include all income of both spouses for the whole year; Include the income of any other persons in the household, except boarders, renters, dependents, and parents (see pages 29 and 30). Same as Married All Year. Include all of the taxpayer s income for the whole year PLUS the spouse s income for the time they were married; Include the income of any other persons in the household, except boarders, renters, dependents, and parents (see pages 29 and 30). Include all of the taxpayer s income for the whole year PLUS the spouse s income for the time they were married; Apply for separate refunds.

31 Additional M1PR Information Flipchart 31 Renters: Total household income must be less than $59,960. The maximum refund is $2,100. Homeowners: Total household income must be less than $110,650. The maximum refund is $2,710. o Neither the property owner nor the relative occupant may claim a property tax or special refund for a property with a Relative Homestead status. Individuals that are eligible to be claimed as a dependent do not qualify for the property tax refund. Schedule 1: Special Property Tax Refund Complete Schedule 1 on Form M1PR to determine eligibility. There are no income limits on the special refund. To qualify, the taxpayer must: 1. Have owned and lived in the home on both January 2, 2017 and January 2, Have net property taxes on the homestead increase by at least 12% from 2017 to Have the net property taxes increase by $100 or more. Schedule 2: Subtractions from Household Income: Complete Schedule 2 on Form M1PR to determine any applicable subtractions from household income. Subtraction for those age 65 and older or disabled If the taxpayer or their spouse is 65 as of December 31, 2017 or is disabled, enter $4,050 on Form M1PR, Line 31. Dependent Subtraction Number of Enter on Form dependents* M1PR, Line $ $5, $10, $15, $20,250 5 or more $24,300 *If more than one person may claim the dependent, follow the federal tie-breaker rules (see table on page 10). Retirement Account Subtraction If the taxpayer or their spouse contributed to a 401(k), IRA, 457(b), or other qualified retirement plan, they can enter $5,500 ($11,000 if filing joint) or their total contributions; whichever is less on Form M1PR, Line 33. For more information about how to calculate the subtraction, see the M1PR instruction booklet. Property Tax Refund Filing Deadline The 2017 Form M1PR filing due date is August 15, A refund will not be issued for returns received after August 15, Refund checks expire two years after the original issue date. M1PR MN

32 Other Information Volunteer Resources IRS Minnesota VITA Hotline Mon-Fri: 9 a.m. 8 p.m Mon-Fri: 8 a.m. 4:30 p.m. Sat: 11 a.m. 7 p.m. Flipchart 32 Twin Cities Area Toll Free Questions individual.incometax@state.mn.us Outreach & Education Twin Cities Area Toll Free Questions Jessica.Delcid@state.mn.us Address U.S. Bank Financial Center..... Minnesota Revenue IRS Suite 705 Attn: Outreach & Education 1550 American Blvd. E. Mail Station 5410 Bloomington, MN St. Paul, MN Taxpayer Resources IRS Minnesota Income Tax Information Twin Cities Area Toll Free Questions individual.incometax@state.mn.us Collections Sales Tax Information Taxpayer Rights Advocate Office Withholding Tax Information Order Forms Refund Status: Automated (24/7) Websites Site Locations (by ZIP code) (TCE) (VITA) OTHER INFORMATION IRS MN

33 Standard Deduction, Filing Requirement, Mileage Rates, and Income Limits for Credits Flipchart 33 Filing Status Category Standard Deduction Single $6,350 $6,300 $6,300 $6,200 Head of Household $9,350 $9,300 $9,250 $9,100 Married Filing Joint/Qualified Widow(er) $12,700 $12,600 $12,600 $12,400 Married Filing Separate $6,350 $6,300 $6,300 $6,200 Exemption $4,050 $4,050 $4,000 $3,950 Filing Status Additional Standard Deduction Single $1,550 $1,550 $1,550 $1,550 Head of Household $1,550 $1,550 $1,550 $1,550 Married Filing Joint/Qualified Widow(er) $1,250 $1,250 $1,250 $1,200 Married Filing Separate $1,250 $1,250 $1,250 $1,200 Residency Filing Requirements Nonresident $10,400 $10,350 $10,300 $10,150 Type of Mileage Standard Mileage Rates Business (Jan. 1 - June 30) $0.535 $0.54 $0.575 $0.56 Business (July 1 Dec. 31) $0.535 $0.54 $0.575 $0.56 Charitable $0.14 $0.14 $0.14 $0.14 Medical and Moving (Jan. 1 - June 30) $0.17 $0.19 $0.23 $0.235 Medical and Moving (July 1 Dec. 31) $0.17 $0.19 $0.23 $0.235 Credit Income Limits Earned Income Credit (EIC): No children $15,010 $14,880 $14,820 $14,590 EIC: No children, Married Filing Joint $20,600 $20,430 $20,330 $20,020 EIC: 1 child $39,617 $39,296 $39,131 $38,511 EIC: 1 child, Married Filing Joint $45,207 $44,846 $44,651 $43,941 EIC: 2 children $45,007 $44,648 $44,454 $43,756 EIC: 2 children, MFJ $50,597 $50,198 $49,974 $49,186 EIC: 3 children $48,340 $47,955 $47,747 $46,997 EIC: 3 children, Married Filing Joint $53,930 $53,505 $53,267 $52,427 M1ED: K-12 Education Credit* $37,500 $37,500 $37,500 $37,500 M1CD: Child and Dependent Care Credit $39,510 $39,510 $39,400 $39,000 * Maximum Household Income is $37,500 for 2 or fewer children. The limit increases by $2,000 for each additional qualifying child.