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Last Updated: 1/17/2018

Phase-out of Personal Exemption(s) Addition

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​Taxpayers who claimed personal or dependent exemptions on their federal return may have to add back a portion of the exemption(s) to taxable income on their Minnesota return.

The reason for this addition is that Minnesota doesn’t fully match the federal exemption.  For both federal and state purposes, the exemptions are phased out as income rises; however, the Minnesota phase out begins at a lower income level.

Complete line 2 of Schedule M1M, Income Additions and Subtractions, if you claimed one or more personal or dependent exemptions and your Federal adjusted gross income (AGI) exceeds the amount listed below:

  • $279,500, if you’re married and file a joint return with your spouse
  • $232,900, if you file as “head of household”
  • $186,350, if you’re single
  • $139,750, if you’re married and file separate returns

Note: You must use the same filing status on your Minnesota income tax return as you did on your federal return. For more information, see Filing Status for Individuals.

Why do I have this addition?

Before 2010, personal and dependent exemptions were gradually phased out as federal AGI increased the same way for federal and state purposes.  Since then, federal laws have been passed to change the way exemptions phase out on the federal return.
However, Minnesota didn’t match the federal laws beginning with tax year 2011 and instead uses the previous phase-out rules. As a result, taxpayers whose Federal AGI exceeds the income threshold listed above have to pay state tax on part of their federal exemptions. The portion that is taxable varies, increasing by 2 percent for each $2,500 (or $1,250 for married filing separate) by which Federal AGI exceeds the threshold.

To calculate the amount of your addition, use the worksheet for line 2 in the instructions for Schedule M1M. The table below shows one example of how the addition is calculated.

Example: Worksheet for Line 2 (Schedule M1M) –  Married taxpayer with two exemptions

1. Multiply the number in box 6d of federal Form 1040 or 1040A by $4,050. ​$8,100
2. Enter your federal adjusted gross income (from line 37 of federal Form 1040 or line 22 of Form 1040A). ​298,200
3. Enter the amount corresponding to your filing status

          Single:  $186,350
          Married Filing Jointly or Qualifying Widow(er): $279,500
          Married Filing Separately:  $139,750
          Head of Household:  $232,900




4.  Subtract step 3 from step 2   ​​8,700​​
5.  Divide step 4 by $2,500 ($1,250 if married filing separately).  If the result is not a whole number, increase it to the nearest whole number (Example: Increase 0.0004 to 1)​ 7
6. Multiply step 5 by 2% (.02).  Enter the result as a decimal ​0.14
7. Multiply step 1 by step 6 1,134
8. Subtract step 7 from step 1
9. Enter your federal exemption amount (from line 42 of Form 1040 or line 26 of Form 1040A) 8,100
10. Subtract step 8 from step 9.  This is your Minnesota personal exemption phase-out addition. ​1,134