Dividends from Mutual Funds

Because mutual funds invest in state and local bonds, some of the dividends they distribute may be exempt from federal tax. If you received such dividends, you may have to add them back to your Minnesota taxable income.

When must I make this addition?

You must make this addition if your dividends were not included in your federal adjusted gross income. You must add back the dividends as follows:
  • If at least 95 percent of the dividends came from bonds issued by state or local governments in Minnesota, add back only the portion that came from governments outside of Minnesota.
  • If less than 95 percent of the dividends came from state or local governments in Minnesota, you must add back the full amount of the dividends.

To find the percentage of mutual fund dividends that came from Minnesota bonds, see the tax statement you received from your fund.​

Note: Each mutual fund stands on its own for this calculation. You cannot group them to alter the percentages.

How do I report this addition?

Enter the amount on Schedule M1M, Income Additions and Subtractions. Include Schedule M1M when filing Form M1, Individual Income Tax.

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