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Last Updated: 12/27/2016

State Income Tax or Sales Tax Addition

You can deduct state income tax or sales tax you paid on your federal tax return if you itemize deductions. However, Minnesota doesn’t allow deductions for state or Canadian provincial taxes.

As a result, any deductions you took for these taxes on Schedule A of your federal Form 1040 must be added back to taxable income on your Minnesota return. View the statute, M.S. 290.01. subd. 19a(2).

To calculate this addition, you generally use the “Worksheet for line 2” worksheet in the Minnesota Individual Income Tax instruction booklet. You may have to figure  the addition differently, depending on your total itemized deductions, filing status and tax situation, as explained below.

You don’t have to add back the full amount if your itemized deductions exceed the standard deduction by less than the state tax you listed on Schedule A. If that happens, you only add back the difference between your itemized and standard deductions, as shown in the example below.

Example: Robb and Mary file jointly and deduct $2,500 of state income tax on their federal return using Form 1040, Schedule A. Their total itemized deductions are $13,400; their standard deduction would be $12,400. They must add back only the $1,000 difference between their itemized and standard deductions (rather than the full $2,500 deduction they took on Schedule A).

Married Couples Filing Separate Returns

If you’re married and file separately, you and your spouse must each complete the worksheet to calculate your addition amount(s). For details, see the instructions for Form M1.

Nonresident Aliens

If you filed your federal return as a “nonresident alien,” don’t use the worksheet to calculate your addition. Instead, use one of the amounts listed below (depending on the form used to file your federal return):

  • The amount of state income tax from Schedule A of your Form 1040NR, Nonresident Alien Income Tax Return.
  • The amount included on the” itemized deduction” line of your Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents.

S corporation Shareholders, Individual Partners and Beneficiaries

If you received income from an S corporation, partnership, estate or trust, you must add back your prorated share of any state income tax that was deducted when calculating the entity's income. This amount, if any, will be listed on the Schedule KS, KPI or KF that you received.

Report this addition on Form M1M, Income Additions and Subtractions. Do not include this amount on line 2 of Form M1.