2025 Tax Law Changes

Coerced Debt Subtraction 

Taxpayers with federally taxable debt forgiveness income can subtract taxable coerced debt from their Minnesota tax return. Coerced debt is debt incurred in the victim’s name, and discharged by a court, because of: 

• The use of their personal information without their knowledge or consent
• The use or threat of force, coercion, or similar means
• Economic abuse

Those eligible for the Coerced Debt Subtraction may also subtract taxable coerced debt from the income used to calculate their Homestead Credit Refund. 

Consumer Enforcement Public Compensation Subtraction

Taxpayers who received federally taxable compensation from the consumer protection restitution account established during the 2025 legislative session can subtract the amount of that compensation from their Minnesota tax return. The amount that an eligible consumer receives as a distribution from this account is a subtraction. 

Those eligible for the Consumer Enforcement Public Compensation Subtraction may also subtract this amount from the income used to calculate their Homestead Credit Refund. 

Foreign Service Retirement Subtraction

Taxpayers who receive certain foreign service pension or retirement income may be eligible to reduce their income by their federally taxable distributions when completing their Minnesota tax return. 

To qualify, the taxpayer must receive retirement income from either the Foreign Service Retirement and Disability System or the Foreign Service Pension System. A taxpayer contributes to these retirement programs while employed in the United States Foreign Service. 

Service Employees International Union (SEIU) Stipend Payment Subtraction 

Limited Land Access Farmer

The Minnesota Beginning Farmer Tax Credit program was amended to repeal and replace the definition of “emerging farmer” with “limited land access farmer.” A limited land access farmer rents farmland for a term of three years or less from someone they are not related to, or rents from an incubator farm. Limited land access farmers will be eligible for a tax credit of 12%, as opposed to the 8% available to all other farmers.

e-Bike Rebate

For 2025, the eligibility requirements and maximum rebate are changing and a lottery system will be used to award rebates if the number of applications exceeds the available funding. 

For details, go to e-Bike Rebate. 

Homestead Credit Refund

Taxpayers who are eligible for certain new income tax subtractions may also subtract these amounts from the income used to calculate the Homestead Credit Refund:

• Coerced Debt Forgiveness Income
• Consumer Enforcement Public Compensation
• Service Employees International Union (SEIU) Stipend Payments

For details about these subtractions, see the Individual Income Tax section, above.

Credit for Increasing Research Activities (R&D Credit)

A portion of the current year R&D credit is now refundable. You must make an election on a timely filed return (including extensions) to claim the refundable portion. This change is effective for taxable years beginning after December 31, 2024. For more details, see Credit for Increasing Research Activities.

Short Line Railroad Infrastructure Modernization Tax Credit

Eligible taxpayers must now apply with the Department of Transportation for a credit certificate. This change is effective for taxable years beginning after December 31, 2024. The Department of Revenue will continue to manage credit transfer agreements.

Informational Estate Returns

The requirement for the first informational return has been removed. Heirs of estates are now only required to file one informational return between 36 and 39 months after the decedent’s death. This change is effective as of June 15, 2025. 

Sales Tax

Retail Delivery Fee Exemption

Starting July 1, 2025, the following items are exempt from the Retail Delivery Fee:

• Fuel products, liquefied natural gas, or liquefied petroleum gas
• Road construction materials

Qualified Data Centers Electricity Exemption 

Starting July 1, 2025, qualified data centers can no longer purchase electricity used or consumed in the operation of a qualified data center or qualified refurbished data center exempt from tax.

Qualified Large-Scale Data Centers

Qualified Large-Scale Data Centers were added to the Qualified Data Center definition. For details, see Qualified Data Centers.

June Accelerated Payment

The June Accelerated payment is reinstated and takes effect June 1, 2027. We'll provide more information closer to the effective date. 

Hermantown Local Sales Tax Increase Authorized

The city of Hermantown is authorized to extend its local sales tax and use the revenue for additional sewer and pump station projects. 

Cannabis Tax

Starting July 1, 2025, the Cannabis Gross Receipts Tax rate increased to 15% (from 10%). For more information, go to Cannabis Tax.

Lawful Gambling Tax

Starting July 1, 2025, lawful gambling organizations no longer need to provide a "cash count" as part of their annual inventory. For details and updated forms, go to Annual Certified Physical Inventory.

Malt Beverage Excise Tax

Starting in 2026, malt beverage producers who qualify for the Brewer Credit and produce less than 250 barrels a year may elect to file and pay alcohol excise tax annually. 

Note: Before making this change, brewers must notify Revenue before January 20, 2026, so we can update their tax account. Contact us at 651-556-3036 or alc.taxes@state.mn.us. For more information, go to Fermented Malt Beverage Excise Tax.

Minnesota Care Taxes

Starting July 1, 2025, wholesale drug distributors must include all rebates when calculating their gross revenues. For more information, go to MinnesotaCare Rebates and Gross Revenues.