Important: Changes to 2017 Minnesota tax returns

Minnesota Department of Revenue sent this bulletin at 02/23/2018 03:31 PM CST

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The federal Bipartisan Budget Act of 2018 renewed a number of individual and business tax benefits for tax year 2017. The Internal Revenue Service (IRS) recently announced they updated their forms and schedules to allow taxpayers to file returns claiming these benefits. These changes could affect individuals and businesses filing their 2017 Minnesota tax returns.

 

For more information on the extended or modified tax provisions for tax year 2017, visit our website:

 How does this affect 2017 Minnesota tax return filers?

Minnesota has not adopted these federal changes. Taxpayers claiming these benefits on their federal return must now use the updated forms and instructions posted on the Minnesota Department of Revenue’s website when completing their Minnesota individual income and business tax returns.

Be sure your Minnesota tax preparation software is updated for these provisions before filing Minnesota returns that are affected by the federal changes. Some vendors have indicated it may take up to a week to update their software.

If there are future legislative changes impacting 2017 Minnesota returns, taxpayers may be able to avoid filing an amended return if they use these updated Minnesota forms.

We will continue to monitor the 2018 Minnesota Legislative Session and determine the steps taxpayers should take if any new legislation affects 2017 Minnesota tax returns.

 

What are the changes to 2017 Minnesota business tax forms and schedules?

Our business tax return instructions list the provisions that may affect 2017 Minnesota business tax returns. We posted these updated schedules and instructions:

  • Form M2, Income Tax Return for Estates and Trusts (Instructions Only)
  • Form M3, Partnership Return (Instructions Only)
  • Form M4, Corporate Franchise Tax Return (Instructions Only)
  • Form M8, S Corporation Return (Instructions Only)
  • Schedule KF, Beneficiary’s Share of Minnesota Taxable Income
    • Lines 8 and 16 Codes
  • Schedule KPI, Partner’s Share of Income, Credits and Modifications
    • Lines 8 and 10 Codes
  • Schedule KS, Shareholder’s Share of Income, Credits and Modifications
    • Lines 8 and 10 Codes

What are the changes to 2017 Minnesota individual income tax schedules?

We posted an updated Schedule M1NC, Federal Adjustments. We identified changes in the table below. To highlight changes, we crossed out the deleted language in the “Before” column and bolded the added or changed language in the “After” column.

Line

Before

After

3

Subtract line 2 from line 1. Also include any amount from Schedule KPI, KS, or KF with federal adjustment code 11.

Subtract line 2 from line 1. Also include any amount from Schedule KPI, KS, or KF with adjustment code 11 or 14.

4

This line intentionally left blank.

Tuition and fees deduction from your federal Form 1040, line 34, or Form 1040A, line 19.

5

This line intentionally left blank.

Home mortgage debt cancelled or forgiven in 2017 and excluded from federal income.

6

This line intentionally left blank.

Enhanced cost recovery allowed under the Bipartisan Budget Act of 2018 (see instructions).

7

Full-year residents, do not enter an amount on this line.

Part-year and nonresidents: If your principal residence was in the federally designated hurricane zone for Hurricane Harvey, Irma, or Maria and you withdrew funds from a qualified retirement account, enter the amount of your withdrawal you excluded from federal taxable income that would have been included had your residence not been in the hurricane zone.

Full-year residents, do not enter an amount on this line.

Part-year and nonresidents: If your principal residence was in the federally designated hurricane zone for Hurricane Harvey, Irma, or Maria or California wildfire disaster area, and you withdrew funds from a qualified retirement account, enter the amount of your withdrawal you excluded from federal taxable income that would have been included had your residence not been in the hurricane zone or wildfire disaster area.

8

If you have an amount on lines 1 through 7 and have an item of income or adjustment to income subject to a rule involving AGI (such as Rental Real Estate Losses, Social Security Income, IRA Deduction, or Student Loan Interest Deduction), see instructions.

If you have an amount on line 3 or lines 5 through 7 and have an item of income or adjustment to income subject to a rule involving AGI (such as Rental Real Estate Losses, Social Security Income, IRA Deduction, or Student Loan Interest Deduction), see instructions.

10

Adjustments to itemized deductions calculated using AGI. If you filed federal Schedule A with deductible medical and dental expenses on line 4, see instructions. If you reported an amount on line 9 of this schedule, and on federal Schedule A, line 27, or claimed a casualty or theft loss not related to a hurricane, see instructions.

Itemized deductions calculated using AGI. If you filed federal Schedule A with deductible medical and dental expenses on line 4, see instructions. If you reported an amount on line 9 of this schedule, and on federal Schedule A, line 27, or claimed a casualty or theft loss not related to a hurricane or wildfire disaster area, see instructions.

11

If you claimed a casualty loss involving property located in the hurricane zone for Hurricane Harvey, Irma, or Maria, see instructions.

If you claimed a casualty loss involving property located in the hurricane zone for Hurricane Harvey, Irma, or Maria, or for property located in the California wildfire area, see instructions.

12

If you claimed an enhanced charitable deduction for contributions made to a hurricane relief organization, see instructions.

If you deducted mortgage insurance premiums on your federal Schedule A, or claimed an enhanced charitable deduction for contributions made to a hurricane or wildfire relief organization, see instructions.

14

See instructions if your federal charitable deduction was limited. Include the result of a worksheet if directed.

See instructions if your federal charitable deduction was limited or you entered an amount on line 13 and on Form M1, line 2. Include the result of a worksheet as instructed and from Schedule KPI, KS, or KF code 15.

 

We also changed the instructions for Schedule M1NC, including changes to the worksheets for line 8. We updated the worksheets to request the total of amounts from line 3 and lines 5 through 7.

Additionally, we added a worksheet for line 14. Individuals will use this worksheet if they entered an amount on Schedule M1NC, line 13 and on Form M1, line 2. The worksheet requests the total of amounts from Form M1, line 2, and Schedule M1NC, lines 10 through 12. We designed this worksheet to ensure federal itemized deductions, reduced by Minnesota additions of certain federal itemized deductions, do not fall below the standard deduction for the filing status.