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How Minnesota Taxes Nonresident Income

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Certain income received by nonresidents is taxed by Minnesota. For more information, see Minnesota Statute 290.17.

The table below shows how Minnesota taxes nonresident income.

Type of Income  
Wages, salaries, tips, commissions, bonuses, severance pay, annual leave, stock options​          Yes, if the services were performed or the income earned in Minnesota
Interest, dividends No*
State refunds, alimony received, unemployment compensation ​ No
Qualified pensions, IRA distributions, annuities, deferred compensation plans​ No
Nonqualified plans (such as stock options) ​ Yes, if earned in Minnesota
Capital gains and losses from the sale of intangible assets (such as stock) ​ No
Capital gains and losses from the sale of tangible assets not used in a trade or business ​ Yes, for property located in Minnesota
Covenant not to compete, goodwill Generally, yes
Gain on the sale of a partnership interest Yes, for partnerships location in Minnesota
Business income from a sole proprietorship​ Yes, to the extent the activities are conducted in Minnesota*
Rent and royalty income ​ Yes, for property located in Minnesota*
Installment sales Yes, if the capital assets were located in Minnesota, but only the gain on the sale was assigned to Minnesota, not the interest
Like-kind exchanges​ No. If no gain or loss was recognized on the federal return (Internal Revenue Code, section 1031), none would be recognized on the Minnesota return. This is true even if the replacement was located outside of Minnesota​.
Partnership, S Corporation income or loss ​ Yes, to the extent the activities were conducted within Minnesota*
Farm income or loss ​ Yes, to the extent the activities were conducted within Minnesota*

 

Gambling Winnings  
From American Indian casinos ​ Yes, from casinos located in Minnesota ​
From Minnesota lottery Yes, from tickets purchased in Minnesota ​
From charitable or lawful gambling, or pari-mutuel wagering ​ Yes, from gambling in Minnesota ​

*For activities conducted partly within Minnesota, use the single-sales factor apportionment method starting in tax year 2014. For an example of the single-sales factor method, see Schedule M4A of Form M4, Corporation Franchise Tax Return. Business flow-through income, including interest, is apportioned to Minnesota when the business is located here.

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