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Last Updated: 12/19/2013

American Indians - Reservation Income Subtraction

Minnesota does not tax certain types of income received by American Indians. If you are an enrolled member of an American Indian tribe, you may be eligible for a subtraction that lowers the amount of income that is taxed by Minnesota.

If you meet the requirements below, complete Schedule M1M, Income Additions and Subtractions, and file it with your state return.

Note: This subtraction may affect your eligibility for, or the amount of, the Working Family Credit or the Child and Dependent Care Credit. The K-12 Education Credit is not affected.
 

Income that is exempt from Minnesota tax

Your income is exempt from Minnesota’s Individual Income Tax if all of the following are true:
  1. You are an enrolled member of an American Indian tribe.
  2. You live on the reservation where you are an enrolled member. (Exceptions are covered in “Bands and Communities,” below.)
  3. The income is derived from the reservation. This includes:
      • Wages for services performed on a reservation
      • Interest from a bank located on the reservation
      • Distributions from casino profits if the casino is located on the reservation
      • Pension income based on contributions due to employment on the reservation
      • Military pension income based on pay that was exempt from state tax because you entered the military while residing on the reservation
      • Social Security income based on contributions due to employment on the reservation
      • Rent and royalty income from real property and/or personal property located on a reservation
      • Net gain from the sale of real property and/or personal property located on a reservation
      • Dividend income from a corporation located on a reservation
      • Partnership and S corporation income, dividends or capital gains from business activity on a reservation
      • Income from a sole proprietorship from business activity on a reservation
      • Farm income from a farm located on a reservation
      • Unemployment compensation that is based on employment on a reservation
      • Gambling winnings, but only if won on a reservation where you reside.

Income that is not exempt from Minnesota tax

Your income is not exempt from Minnesota’s Individual Income Tax if either of the following are true:
  • The income was not derived from a reservation, no matter where you live.
  • You do not live on the reservation where you are an enrolled member, no matter where the income was derived.

Bands and Communities

You must live and work on your band’s or community’s reservation in order to take the Reservation Income Subtraction. However, if you’re a member of a band of the Minnesota Chippewa Tribe (MCT), you may take the subtraction if you live and receive income on any of the six MCT reservations.

The MCT bands are:
  • Mille Lacs (including Hinckley)
  • Nett Lake (Bois Forte)
  • Fond du Lac
  • Leech Lake
  • White Earth
  • Grand Portage
Note: The Red Lake Tribe, although Chippewa, is not a member of the MCT. Red Lake members must live and work on the reservation where they are enrolled to qualify for this subtraction.