Law Change FAQs for Tax Year 2020
Do I report Paycheck Protection Program loan forgiveness, and related business expenses that were not deductible for federal purposes, on my Minnesota return?
Yes. You will make an adjustment on the appropriate Minnesota nonconformity schedule for the federally excluded loan forgiveness amount and the related federally disallowed business expenses.
If I need to repay Paycheck Protection Program loans, are these amounts included in Minnesota taxable income?
For Minnesota purposes, repaid loan amounts will be treated the same way as they are on the federal return.
Are the $600-a-week Federal Pandemic Unemployment Compensation payments included in Minnesota adjusted gross income?
Yes. All unemployment insurance payments are taxable income in Minnesota.
Are the IRS economic impact payments included in household income for the Minnesota Property Tax Refund?
No. These payments are considered a federal tax credit.
Has COVID-19 affected the turnaround on substitute forms and electronic filing certification testing?
No. The expected turnaround is still 10 business days from submission.
Are taxpayers required to amend their Minnesota return to reduce the addback on qualifying depreciable property?
No. You may choose not to reduce the addback for qualifying depreciable property and continue to claim the related one-fifth subtractions on subsequent returns. If we audit a return with qualifying depreciable property, the addback and subsequent subtractions will be adjusted.
If taxpayers included Section 179-eligible purchases in the bonus depreciation on their 2018 and 2019 federal and Minnesota income tax returns, can they now amend their state return to report those purchases separately?
No, unless you first amend your federal return. Your treatment of bonus depreciation and Section 179 expensing on the Minnesota return must match what you elected on the federal return. If you amend your federal return to separate Section 179 expensing from what you previously claimed for bonus depreciation, you must amend your Minnesota return to reflect the federal changes within 180 days.
Will Minnesota conform to federal tax law changes enacted after December 31, 2018?
We continue to monitor the Minnesota Legislature and will provide updates if any tax-related bills are enacted.
What is Minnesota’s dependent exemption amount for tax year 2020?
The dependent exemption amount is $4,300 per qualifying dependent. It phases out at certain income levels depending on your filing status:
- Single: $197,850
- Married Filing Jointly and Qualifying Widow(er): $296,750
- Married Filing Separately: $148,375
- Head of Household: $247,300
When did Minnesota conform to Opportunity Zone Gain deferrals, and who qualifies for a refund under this provision?
Minnesota retroactively conformed to the Opportunity Zone gain deferrals in May 2019. This permits investors to defer tax on almost all capital gains they properly reinvest in Opportunity Zones from January 1, 2018, to December 31, 2026.
C corporations may get a refund under this provision.
Individuals must adjust for the retroactive conformity. Due to the Special Limited Adjustment, individuals may not claim a refund.
If I amend my federal income tax return for a net operating loss carryback, do I also need to amend my Minnesota return?
Yes, file Form M1X, Amended Minnesota Income Tax, within 180 days after filing the amended federal return. Include a copy of the amended federal return. For details, see the Form M1X instructions.
Does Minnesota's 2020 quarterly estimate grace period (of 75% of 2018 tax) apply to all four quarters of 2020?
Yes. To qualify for the grace period, you must pay the minimum payment in four equal installments.
What is considered additional nontaxable income for the K-12 Education Credit and Property Tax Refund?
For differences between the definitions of additional nontaxable income and household income, see the instructions for:
- Schedule M1ED, K-12 Education Credit
- Form M1PR, Homestead Credit Refund and Renter's Property Tax Refund
For income additions on:
- Schedule M1ED, see Minnesota Statute 290.0674
- Form M1PR, see Minnesota Statute 290A.03
Does Minnesota allow for amended individual returns to be done electronically like the IRS does for 2019?
Not at this time. We are interested in pursuing this in the future and will give updates as they are available.
Is line 3 of 2020 Schedule M1HOME limited at $50,000 ($100,000 for Married Filing Jointly)?
Yes. Minnesota law limits the total amount of contributions for all years to $50,000 ($100,000 for Married Filing Jointly).
Will the Schedule M1NR instructions be updated to include Minnesota income adjustments for nonresident aliens who cannot use the standard deduction?
Yes. We will include filing requirements for nonresident aliens in the Form M1 instructions.
Does Minnesota have a form to disclose disregarded entities?
How do property owners electronically submit Certificates of Rent Paid (CRPs) to Minnesota?
At this time, electronic CRP filing is only available to property owners and managing agents already registered in e-Services. They can log in to e-Services to upload a file.
When will the 2020 Certificate of Rent Paid and its instructions be available?
We will provide them in early November.
Was the Certificate of Rent Paid updated for tax year 2020?
Yes. We do not expect significant changes to the form other than clarifying some of the instructions.
On the Property Tax Refund return, do co-occupants need to include adult children still living at home if they are not claimed as dependents?
Yes. Include the income of adult nondependent children on Worksheet 5 in the instructions for Form M1PR, Homestead Credit Refund and Renter's Property Tax Refund.
How is alimony I received treated on the Property Tax Refund return?
Alimony is treated as household income. If you did not include it in adjusted gross income, you must add it back to household income.
Is the Minnesota addition for bonus depreciation repealed?
No. The Minnesota addition for bonus depreciation remains unchanged.
Can I claim Section 179 expensing on my Minnesota return for property I elected to depreciate using bonus deprecation on my federal return?
No. You may not claim a different bonus depreciation or Section 179 expensing treatment on your Minnesota return from the treatment elected on your federal return. If you amend your federal return to change this treatment, you must amend your Minnesota return within 180 days to reflect your federal changes.
Do I need to reduce future-year subtractions if I do not amend to adjust my Section 179 addition?
No. Minnesota Section 179 subtractions are based on prior-year Minnesota Section 179 additions. If you do not adjust your addition, future-year subtraction amounts attributable to an addition would not change.
Is the qualified depreciable property the received property or the relinquished property of a like-kind exchange?
The qualified depreciable property is the property received as a part of the transaction that qualified for like-kind exchange treatment under the Internal Revenue Code, Section 1031, as amended through December 16, 2016, but not as amended through December 31, 2018.
If my Section 179 expensing includes both qualified depreciable property and other property, how do I calculate the Minnesota modification?
Remove qualified depreciable property from the total invested property when calculating the Minnesota modification.
For example, in tax year 2018 if you invested in Section 179 property in the amount of $125,000 and $60,000 of this amount is qualified depreciable property, the Minnesota addition is calculated as follows:
|Federal Section 179 Expensing||$125,000|
|Less Qualified Depreciable Property||$60,000|
|Less Minnesota Allowance||$25,000|
|New Subtotal (Base for Minnesota Addition)||$40,000|
Multiply New Subtotal by 80% to get Minnesota
Addition for Section 179 Expensing
Am I required to complete a Minnesota addition for Section 179 expensing if the only property for which I claimed federal Section 179 expensing is like-kind exchange property?
For tax years 2017, 2018, and 2019, you must complete a Minnesota addition for Section 179 expensing unless you meet at least one of these conditions:
- You received property that is “qualifying depreciable property” under Minnesota Statute 290.0131, subd. 10.
- You did not claim federal Section 179 expensing for property other than “qualifying depreciable property”
Do I need to amend my Minnesota return in the year of the like-kind exchange transaction to reduce my Minnesota Section 179 addition?
No. If you choose not to amend your Minnesota return solely to reduce your addback, you may continue claiming related one-fifth subtractions on your subsequent returns.
If you amend your Minnesota return for a reason other than to reduce the Section 179 addition, you must make all adjustments to comply with Minnesota law, including reducing your 179 addback for qualifying depreciable property and the related subsequent subtractions. If we audit a return with qualifying depreciable property, we may adjust the addback and related subsequent subtractions.
Am I required to complete a Minnesota Schedule LK or Form 8824 when amending to remove my Section 179 addition in tax years 2017, 2018, or 2019?
No, you are not required to complete a Minnesota Schedule LK or Form 8824. See the updated instructions for Minnesota Form M1X, M3X, M4X, or M8X for additional guidance.
Will we be able to electronically file Schedule M2RT, Resident Trust Questionnaire?
Yes. We released a draft schema of this form on September 30.
What are the criteria for filing Schedule M2RT, Resident Trust Questionnaire?
Trusts must file Schedule M2RT if both of these apply:
- The trust meets the statutory definition of a resident trust
- The trust may not have sufficient minimum connections to Minnesota for due process purposes
These trusts must check both the Statutory Resident and Due Process Nonresident checkboxes on Form M2, Minnesota Income Tax for Estates and Trusts. They must also include Schedule M2RT.