Reciprocity Income Subtraction
If your employer withheld Minnesota tax on income covered under reciprocity, you may request a refund of the tax withheld. To do so, you may claim a subtraction from Minnesota taxable income.
Minnesota has income tax reciprocity agreements with Michigan and North Dakota. For more information, see Reciprocity.
Who Qualifies
To qualify, all of these must be true:
- You are a Michigan or North Dakota resident who filed an income tax return in your home state.
- Your only Minnesota source income was personal service income covered under reciprocity. Personal service income includes wages, salaries, tips, commissions, fees, and bonuses.
- Your employer withheld Minnesota income tax from your personal service income.
How to Claim the Subtraction
File a Minnesota income tax return (Form M1, Individual Income Tax) while following these steps:
- Complete Schedule M1M, Income Additions and Subtractions.
- Complete Schedule M1W, Minnesota Income Tax Withheld, to report your Minnesota tax withheld.
- Enclose both schedules and a copy of your home state’s tax return when you file Form M1.
If you are married and file a joint return, you must include both you and your spouse’s names, Social Security Numbers, and dates of birth on all forms – even if only one spouse works in Minnesota.
Minnesota-Source Income Other than Personal Service Income
This income is not covered under reciprocity and is taxable to Minnesota. If this income meets the minimum filing requirement ($12,525 for 2021), you must file Form M1 and Schedule M1NR, Part-Year Residents/Nonresidents. For a list of income taxable to Minnesota, see How Nonresident Income is Taxed by Minnesota.
Note: When completing column B of Schedule M1NR, do not include your personal service income covered by reciprocity.
I Do Not Want My Employer to Withhold Minnesota Tax
Provide your employer a completed Form MWR, Reciprocity Exemption/Affidavit of Residency, each year.
