Dividends from Mutual Funds

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

You must add your dividends back if they were not included in your federal adjusted gross income. To determine your addback amount, review your tax statement received for the mutual fund dividends:

• If 95% or more 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% of the dividends came from state or local governments in Minnesota, add back the full amount

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

To report the addition, enter the amount on Schedule M1M, Income Additions and Subtractions. Include Schedule M1M when filing Form M1, Individual Income Tax.