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Last Updated: 11/16/2015

How Nonresident Income is Taxed by Minnesota

Certain income received by nonresidents is taxed by Minnesota, see Minnesota Statute 290.17.

The table below shows how Minnesota taxes nonresident income.

Nonresident Income

Type of Income Taxed by Minnesota?
Wages, salaries, tips, commissions, bonuses, severance pay, annual leave, stock options​ Yes, if the services were performed or the income earned in Minnesota
Interest, dividends ​ No*​
State refunds, alimony received, unemployment compensation ​ No​
Qualified pensions, IRA distributions, annuities, deferred compensation plans​ No​
Nonqualified plans (such as stock options) ​ Yes, if earned in Minnesota
Capital gains and losses from the sale of intangible assets (such as stock) ​ No​
Capital gains and losses from the sale of tangible assets not used in a trade or business ​ Yes, for property located in Minnesota ​
Covenant not to compete, goodwill​ Generally, yes​
Gain on the sale of a partnership interest Yes, for partnerships located in Minnesota
Business income from a sole proprietorship​ Yes, to the extent the activities are conducted within Minnesota*
Rent and royalty income ​ Yes, for property located in Minnesota*
Installment sales​ Yes, if the capital assets were located in Minnesota, but only the gain on the sale was assigned to Minnesota, not the interest
Like-kind exchanges​ No, if no gain or loss was recognized on the federal return (IRC section 1031), none would be recognized on the Minnesota return, even if the replacement was located outside of Minnesota​
Partnership, S Corporation income or loss ​ Yes, to the extent the activities were conducted within Minnesota*
Farm income or loss ​ Yes, to the extent the activities were conducted within Minnesota*
Gambling Winnings​ ​
From American Indian casinos ​ Yes, from casinos located in Minnesota ​
From Minnesota lottery ​ Yes, from tickets purchased in Minnesota ​
From charitable or lawful gambling, or pari-mutuel wagering ​ Yes, from gambling in Minnesota ​

*For activities conducted partly within Minnesota, use the single-sales factor apportionment method starting in tax year 2014. For an example of the single-sales factor method, see Schedule M4A of  Form M4, Corporation Franchise Tax Return.  Business flow-through income, including interest, is apportioned to Minnesota when the business is located here. For tax years 2013 and earlier, use the three-factor formula (sales, property, and payroll).