Taxpayers with Disabilities

For federal and state income tax purposes, you are considered permanently and totally disabled if you meet both of these requirements as outlined on federal Schedule R:

• You cannot engage in any substantial gainful activity because of a physical or mental condition
• A physician determines that the condition has lasted or can be expected to last continuously for at least a year, or that the result of the condition could be death

If you are age 65 or older, or have a permanent and total disability, you may be eligible for a subtraction that lowers the amount of income that is taxed by Minnesota. To qualify, you must meet certain income eligibility requirements and you or your spouse must be either:

• At least 65 years of age by January 1 of the following year
• Permanently and totally disabled and receiving federally taxable disability income

You may qualify for the Minnesota subtraction for persons age 65 or older even if you do not qualify for the federal credit for the elderly. To claim the subtraction, complete Schedule M1R, Age 65 or Older/Disabled Subtraction, and Schedule M1M, Income Additions and Subtractions. Include these schedules when you file Form M1, Individual Income Tax.

Note: Married couples who file a joint return may claim the subtraction if one spouse meets the requirements. If you are married and filing separate federal returns, you are not eligible unless you and your spouse lived apart for all of the tax year.

* Adjusted gross income is Minnesota adjusted gross income (see instructions for line 9a of Schedule M1R), plus any lump-sum distributions reported on federal Form 4972, and less any taxable Railroad Retirement benefits.

The Minnesota Child and Dependent Care Credit is not only for dependent children under 13. A qualifying person also includes a spouse with a disability or a dependent with a disability who lives with you for more than half the year.

If you paid someone to care for a qualifying person while you worked or looked for work, and your Minnesota adjusted gross income for 2023 was $71,210 or less, you may be able to claim this credit on Form M1. See federal Form 2441 or Schedule 2, and Minnesota Schedule M1CD, Child and Dependent Care Credit.

You may be able to claim a credit against tax based on any premiums you paid for a qualified long-term care insurance policy for which you did not receive a federal tax benefit.

To qualify, your long-term care insurance policy must:

• Qualify as a federal deduction (see federal Schedule A), disregarding the income test
• Have a lifetime long-term care benefit limit of $100,000 or more

The maximum credit is $100 per person. If you qualify, complete Schedule M1LTI, Long-Term Care Insurance Credit, and Schedule M1C, Nonrefundable Credits. Include these schedules when you file Form M1.

Renters or homeowners may be eligible to claim a refund on their Minnesota residence. To qualify, you must have been a full or part-year resident of Minnesota and could not be claimed as a dependent. The refund is based on household income in comparison to property taxes paid on your homestead or rental property.

If you were disabled on or before December 31 of the taxable year for which the taxes were levied or rent was paid, you are allowed a subtraction against household income. The subtraction amount is $4,800 for tax year 2023. A single subtraction of $4,800 is allowed for those filing jointly even if both spouses are disabled.

If you (or your spouse if filing a joint return) are a veteran of the military, including the National Guard and reserves, you may qualify for a nonrefundable credit of up to $750 each for past service.

You may qualify if you have been separated from service and at least one of these is true:

• You served in the military for at least 20 years
• You have a service-related disability rated by the U.S. Department of Veterans Affairs as being 100% total and permanent
• You were honorably discharged and receive a pension or other retirement pay for service in the military

To qualify for the full credit, your Minnesota adjusted gross income must be $30,000 or less. The amount of your credit is reduced by 10% of Minnesota adjusted gross income in excess of $30,000. Veterans with income over $37,500 are not eligible for the credit. For details, see the instructions for Schedule M1C, Nonrefundable Credits. You may not claim this credit if you claim a subtraction for military retirement pay.

This program provides an annual market value exclusion of up to $300,000 on homestead property of a qualifying disabled veteran or their family caregiver.

Qualifications

A property must be the homestead of a qualified veteran in order to receive this value exclusion.

To qualify, you must have been honorably discharged from the U.S. armed forces and be certified by the U.S. Veterans Administration as having a service-connected disability.

If you are a veteran with a 70% disability rating or higher, you are eligible for a market value exclusion of up to $150,000.

If you are a veteran who is totally (100%) and permanently disabled, you are eligible for a market value exclusion of up to $300,000.

Application Process

Applications are available in your county assessor’s office. You must apply by July 1 to qualify for the exclusion on the current year’s market value for taxes payable next year (except manufactured homes assessed as personal property, which are taxed in the same year they are assessed).

If you are a veteran with a disability rating of 70% or higher, you must reapply annually.

If you are a veteran who is totally and permanently disabled, you do not need to reapply after the initial approval. The property will continue to qualify for the value exclusion until there is a change in ownership or use of the property. If a permanently and totally disabled veteran dies before their spouse, the spouse may continue to qualify under this provision for an additional five years after the year of death, so long as the surviving spouse does not remarry and continues to own and reside on the property. The exclusion will be immediately removed if the property is sold, transferred, or otherwise disposed of.

For details, see Market Value Exclusion for Veterans with a Disability.

Household income is your federal adjusted gross income (from your federal income tax return, or what it would have been if you were required to file) plus most nontaxable income such as Social Security, government program payments, and any deferred income excluded from taxable income (such as IRA deductions).

Federal nontaxable income received because of a disability must also be included in household income, such as Compensated Work Therapy (CWT), Social Security disability, personal injury, or other nontaxable settlement income, unless funds were used to pay medical expenses.

For an extensive list of income to be included as household income, see the instructions for Form M1PR.

Free tax help is available for seniors, individuals with low income, individuals who speak limited to no English, or individuals with disabilities. To find a site near you, see Free Tax Preparation Sites, or call 651-297-3724 or 1-800-657-3989.