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Last Updated: 12/29/2016

Reciprocity Income Subtraction

​Minnesota has income tax reciprocity agreements with Michigan and North Dakota. For people who live in one of these states and work in Minnesota, the agreements may simplify tax filing by letting them file a return only in their home state instead of in both states.

Reciprocity prevents both states from taxing the same “personal service income” (wages and other job-related income). Generally only your home state will tax the job-related income you receive from an employer in a reciprocity state.

Michigan or North Dakota residents who work in Minnesota

You are not subject to Minnesota income tax if all of the following are true:
  • You were a full-year resident of Michigan or North Dakota.
  • You returned to your home state at least once a month.
  • Your only Minnesota income was from the performance of personal services (wages, salaries, tips, commissions, or bonuses).

If your employer withheld Minnesota tax from your wages, you may request a refund of that withholding.  To do so, file Form M1, Individual Income Tax return. In addition, you must:

If you are married and file a joint return you must always include both of your names, Social Security numbers, and dates of birth on all forms and schedules – even if only one spouse works in Minnesota.

If your wages are covered by reciprocity and you do not want your employer to withhold Minnesota tax in the future, file Form MWR, Reciprocity Exemption/Affidavit of Residency, each year with your employer.

Other Minnesota income not covered by reciprocity

Minnesota’s tax reciprocity agreements with Michigan and North Dakota cover only personal service income. Any income you receive from other Minnesota sources is taxable if it exceeds the minimum filing requirement (for 2015 is Minnesota gross income of $10,300 or more). You must file Form M1 and Schedule M1NR, Nonresidents/Part-Year Residents.

If you moved to Minnesota

If you move to Minnesota during the year and establish residency, you are a part-year resident. For more information, see Fact Sheet 2, Part-Year Residents.

File as a part-year resident using Form M1 and Schedule M1NR. Do not subtract any reciprocity income on your Schedule M1M. See the Minnesota Individual Income Tax instruction booklet and Schedule M1NR for details.

Minnesota residents who work in Michigan or North Dakota

You only need to file an income tax return with the reciprocity state if your employer withheld income tax from your wages.

If your Minnesota gross income meets the minimum filing requirement ($10,350 for 2016), you should also file Form M1. You may owe Minnesota tax if it was not withheld during the year. Do not file Schedule M1CR, Credit for Taxes Paid to Another State.

Michigan
If your employer withheld Michigan income tax from your pay, you must file a Michigan individual income tax return to claim a refund of that withholding. For forms and assistance with your claim, visit the Michigan Department of Treasury website or call 517-373-3200.

North Dakota
If your employer withheld North Dakota income tax from your pay, you must file a North Dakota individual income tax return to claim a refund of that withholding. For forms and assistance with your claim, visit the North Dakota Office of State Tax Commissioner website or call 701-328-1243.