Tax Tip #7 for Tax Professionals – Itemized deductions for Minnesota

 

The Minnesota Department of Revenue updated Schedule M1SA, Minnesota Itemized Deductions, for tax year 2019.

If clients are eligible to take the standard deduction or itemized deductions on their Minnesota individual tax return, they may choose whichever will be more beneficial to them on the Minnesota return. This applies regardless of what the client elected on the federal return.

Here are some highlights for each category of deductions.

Medical and Dental Expenses

Medical and dental expenses allowed as a deduction for federal tax purposes are allowed as deductions for Minnesota tax purposes. The amount of expenses that exceed 10% of adjusted gross income is allowed as a deduction.

Taxes

Real estate taxes and personal property taxes are deductible on the 2019 Minnesota return. This deduction is available up to $10,000 ($5,000 for married filing separately).

Interest You Paid

Home mortgage interest paid is deductible on the Minnesota return:

• For loans originated prior to December 16, 2017, interest is deductible on loans up to $1,000,000 ($500,000 for married filing separately)
• For loans originated December 16, 2017 and after, interest is deductible on loans up to $750,000 ($375,000 if married filing separately)

Home equity loan interest is not deductible for Minnesota.

Charitable Contributions

Charitable contributions that qualify as deductions on the federal return qualify as deductions for the Minnesota return. Clients may also carry over qualifying deductions from a previous year. The amount allowed on the federal return may be different than the amount allowed on the Minnesota return.

If your client does not itemize deductions, the subtraction for charitable contributions over $500 is still available. See Schedule M1M, Income Additions and Subtractions, for more information.

Casualty and Theft Losses

Casualty and theft losses that have not been compensated for by insurance or otherwise may be deductible on the Minnesota return. The amount allowed on the federal return may be different than the amount allowed on the Minnesota return. Losses do not need to occur in a federally declared disaster area to qualify. Clients may complete Schedule M1CAT, Casualty and Theft.

Unreimbursed Employee Business Expenses

Certain unreimbursed employee business expenses are deductible. Clients may complete Schedule M1UE, Unreimbursed Employee Business Expenses. Clients may deduct the expenses that exceed 2% of their adjusted gross income.

Other Miscellaneous Deductions

See Schedule M1SA instructions for a complete list of allowable deductions. Some common expenses that are no longer deductible include investment fees, tax preparation fees, and safety deposit box fees.