Beginning with tax year 2016, Minnesota will allow taxpayers to subtract certain military retirement pay (including pensions) when calculating Minnesota taxable income and Minnesota alternative minimum taxable income.
To qualify for this subtraction, the retirement pay must be taxable on the federal return, and:
- for service in the active component of the military (U.S. Code Title 10, sections 1401 to 1414),
- for retirement pay for service in the reserve component (U.S. Code Title 10, section 12733), or
- for survivor benefit plan payments (U.S. Code Title 10, sections 1447 to 1455).
To claim the subtraction, you must file Schedule M1M, Income Additions and Subtractions. Taxpayers who claim this subtraction may not claim the nonrefundable credit for past military service.
Will the subtraction benefit me more than the nonrefundable credit?
|You received a military pension or other military retirement pay that qualifies for this subtraction.
Your federal adjusted gross income* is $37,500 or more.
*See your federal Form 1040, line 37; Form 1040A, line 21; or Form 1040EZ, line 4.
|The subtraction will provide a greater benefit.|
Your federal taxable income** is less than your qualifying military pension or retirement pay.
**See your Minnesota Form M1, line 1.
|Generally, the subtraction will provide an equal or greater benefit.|
|You received $14,018 or more in qualifying military pension or retirement pay.|
For tax years 2015 and earlier, military pensions and other military retirement pay received by Minnesota residents was taxable by Minnesota. If you move to Minnesota, your pension becomes taxable once you become a resident, even if you earned the pension before moving to Minnesota. If you move out of Minnesota and establish a new state of residence, the pension payments you receive after establishing your new residence are not taxable to Minnesota.