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Last Updated: 12/27/2016

Subnational Income Taxes of a Foreign Country

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Minnesota residents who paid “subnational” (equivalent to a state) income taxes to a foreign country can subtract that from income on their Minnesota tax return.

However, you can’t subtract any taxes that you:

  • Used to claim the federal Foreign Income Tax Credit (IRS Form 1116).
  • Paid in Canada. (You may claim a credit on your Minnesota return for income taxes paid to a Canadian province using Schedule M1CR, Credit for Taxes Paid to another State.)
  • Paid to a local government in a foreign country. (The subtraction only applies to state taxes or their equivalent.)

To claim the subtraction, complete Schedule M1M, Income Additions and Subtractions. Include the schedule when filing your Minnesota return (Form M1, Individual Income Tax).

Subtraction is for Taxes – Not Foreign Income

This subtraction is only for subnational taxes you paid to a foreign country. It doesn’t apply to foreign income, such as dividends, that’s included on your federal tax return.

Taxes Deducted on Schedule A Can be Subtracted

If all other requirements are met, you can subtract foreign taxes that you deducted on Schedule A of your federal return (instead of claiming the federal Foreign Income Tax Credit).