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Minnesota Nongame Wildlife Fund
You can help preserve Minnesota’s nongame wildlife, such as bald eagles and loons, by donating to the Minnesota Nongame Wildlife Fund. If you wish to donate, please let us know the amount of your donation at the time you are furnishing your tax materials to us. This amount will decrease your refund or increase the amount of Minnesota tax you owe.
New 2005 Minnesota Additions
Starting in 2005 and continuing through 2010, Minnesota taxpayers who take the standard deduction for married filing joint returns, married filing separate returns or qualifying widow/er, will have to add back the increase to the standard deduction.
The federal government increased the deduction to twice that of the single deduction for married filing joint and qualifying widow(er) filers. For taxpayers who are married filing separate the deduction was increased to the same as single filers. In 2011, the deduction reverts back to 170% of the standard deduction for unmarried single taxpayers.
Minnesota married taxpayers filing joint returns (or qualifying widow/er) must add back $1300 into Minnesota taxable income. Married taxpayers filing separate must add back $650.
Domestic Production Activities Deduction
Federal law allows a deduction for businesses that have manufacturing activities in the Untied States. Since Minnesota did not adopt this provision, taxpayers are required to add back the deduction when figuring their taxable income.
For individual income tax purposes, taxpayers could have received this deduction as a sole proprietor or as a flowthrough item as a shareholder in an S corporation, partner in a partnership or beneficiary of an estate or trust and must add it back on the Minnesota return.
New 2005 Minnesota Subtractions
Net Interest for Direct Federal Obligations
Interest earned on certain direct federal obligations is taxable on the federal return, but is not taxable on the state return. Minnesota taxable income may be reduced by state exempt interest from U.S. Treasury notes, bonds, bills, certificates of indebtedness, savings bonds, Student Loan Marketing Association Bonds (Sallie Maes), and any net U.S. bond interest income received as a partner in a partnership, as a shareholder in an S corporation, or a beneficiary of a trust, if it was reported on the federal return.
What’s new. Beginning in 2005, the subtraction is determined by netting out any investment interest and other expenses attributable to U.S. Bond interest income that were deducted on the federal return. Previously these expenses were included as a subtraction item on Schedule MIM.
Subtraction for Active Duty Military Pay
Active duty military receive a subtraction for active duty military pay received while stationed outside of Minnesota and for National Guards and Reservists active duty military pay received for services performed inside of Minnesota.
K-12 Education Credit & Subtraction
Minnesota offers significant tax benefits for taxpayers whose children attend kindergarten through twelfth grade (K-12). Certain types of education expenses paid in 2005 qualify for a refundable credit or for a subtraction from taxable income on the Minnesota individual income tax return.
Taxpayers must keep all receipts for claimed expenses because the Minnesota Department of Revenue audits these filings every year.
Claims for the K-12 Education credit are subject to intensive review each year. Taxpayers must provide receipts which identify the type of expense, dollar amount of expense, and dates. Tutoring expense receipts must include name of instructor/program, address of instructor, signature of instructor, dates of tutoring, and dollar amounts paid for the tax year.
COMMON ERRORS Made in Claiming the Credit
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Failure to have receipts for claimed expenses (canceled checks do not suffice)
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Claiming daycare expenses
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Claims for sporting activities
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Claiming private school tuition as a credit instead of as a subtraction
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Not providing “itemized” receipts for summer programs or travel abroad programs (these expenses are limited to fees which are paid directly to a qualified instructor and an itemized breakdown of expenses is required)
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Claiming travel expenses for travel abroad programs and summer programs
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Claiming transportation expenses paid to siblings or parents of child, not paid to others, or mileage
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Claiming dance costumes, school uniforms, and clothing other than that which is required for gym class
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Claiming school lunches
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Claiming kleenex, back packs or materials used for after-school programs
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Not including the Schedule M1ED with paper filed returns
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Exceeding household income limitations
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