The American Taxpayer Relief Act (ATRA) extended some federal tax provisions allowing certain above-the-line deductions through 2013, and made others permanent. Minnesota did not conform to these provisions for tax year 2013 and beyond. (“Above-the-line” refers to expenses that are deducted before arriving at federal adjusted gross income.)
Differences in these deductions are computed on Schedule M1NC, Federal Adjustments. The adjustments on Schedule M1NC flow through to line 15 of Schedule M1M. The items are listed by line number below. View a detailed list of the acts and provisions extended by ATRA.
Note: Taxpayers must prepare a recomputed federal form if they are affected by an item of nonconformity and have certain items of income, losses or above-the-the-line deductions subject to calculations that involve modified adjusted gross income (MAGI). When preparing the recomputed federal forms, taxpayers will need to use Minnesota MAGI. The most common examples of these items are Social Security Income, rental real estate losses and IRA deductions.
Student Loan Interest Deduction (Line 2)
ATRA permanently extended provisions that expand the definition of qualified student loan interest to include:
Interest payments on a loan for which interest payments have been required for more than 60 months, and
Interest payments paid a taxpayer made voluntarily
For Minnesota purposes, the interest described above is not qualified student loan interest, and therefore cannot be deducted on state returns. Taxpayers who are affected by this issue must calculate their deduction, subject to the phase-out rules discussed below, using only the interest that does qualify for Minnesota purposes.
Phase-out of Student Loan Interest (Line 2)
ATRA permanently extended a provision that increased the MAGI for the student loan interest phase-out to between $60,000 and $75,000, and between $125,000 and $155,000 for married taxpayers filing a joint return.
For Minnesota purposes, taxpayers must use the previous MAGI limits of between $50,000 and $65,000 for single filers, and between $75,000 and $90,000 for married taxpayers filing a joint return.
This calculation is based on Minnesota MAGI. So taxpayers affected by any other income-related nonconformity issue must take those changes into account before calculating their student loan interest deduction.