Net Interest from U.S. Bonds Subtraction

You may qualify if you report interest from qualifying U.S. bonds, bills, notes, or other debt obligations. This includes interest you received through a partnership, S corporation, or as a beneficiary of a trust.

• Be a “direct and primary obligation” of the United States and exempt from state tax under federal law.
• Be in writing – with a promise to pay interest on specific dates – and authorized by Congress.
• Pay federally taxable interest for the year you claim the subtraction.

Note: You must reduce your subtraction amount by any deductions on your federal return for “interest and investment expenses” related to this income. For details and an example, see Expenses Related to Income Not Taxed by Minnesota.

Complete Schedule M1M, Income Additions and Subtractions, and include it with Form M1, Individual Income Tax.

For more information, see:

• Minnesota Statute 290.01
• Minnesota Rule 8002.0300, subpart 3