Military Personnel — Subtractions, Credits, and Extensions

Minnesota Residents

If you are a Minnesota resident in the United States or United Nations Armed Forces (Army, Navy, Air Force, Marines, or Coast Guard), you may qualify for a Minnesota subtraction of your federally taxable active-duty military pay.

You may claim this subtraction if any of these apply:

• You serve in the U.S. or U.N. armed forces and receive federally taxable active-duty military pay under U.S. Code, title 10.
• You are employed for the full-time administration of the Minnesota Department of Military Affairs under Minnesota Statute 190.08, subdivision 3. If you are not paid under M.S. 190.08, subdivision 3, you do not qualify for this subtraction.
• You serve in the Minnesota National Guard or Reserves, and you receive federally taxable active-duty pay for services or compensation for training and meetings under U.S. Code, titles 10 and 32.

Note: The subtraction is not allowed for compensation received for employment by the United States Public Health Service unless received for service after being called to Active Duty, in the Armed Forces, under U.S. Code, title 10.

Nonresidents of Minnesota

If you are a resident of another state required to file a Minnesota return, you are allowed a subtraction for your active-duty military pay on Schedule M1M, Income Additions and Subtractions. When calculating Minnesota tax, your military pay is removed on Schedule M1NR, Nonresidents/Part-Year Residents.

To claim either subtraction, you must complete Schedule M1M and include the schedule when you file your Minnesota income tax return.

If you served in a combat zone or qualified hazardous duty area anytime on or after January 1, 2019, you may be eligible for a refundable credit. The credit is $120 for each month served in a combat zone or qualified hazardous duty area. Partial months count as full months.

To qualify, you must meet all of these requirements:

• You were a Minnesota resident during your months of service
• You served in a combat zone or qualified hazardous-duty area
• You received combat pay, which is exempt from federal income tax

How do I claim the credit?

Claim the credit electronically for the appropriate year, or complete and mail Form M99, Credit for Military Service in a Combat Zone.

When filing, include copies of these military records:

Note: Form M99 is completed separate from your Minnesota income tax return. You are still eligible for the credit even if you are not required to file a state income tax return.

If the person is deceased, their personal representative, surviving spouse, or dependent may qualify for the credit. To claim the credit, file Form M99 by mail and include Form M23, Claim for a Refund for a Deceased Taxpayer.

How long do I have to claim the credit?

You have 3½ years from the original due date of your tax return to claim the credit. The credit for months served in a combat zone from January 1, 2020 to December 31, 2020 will expire on October 15, 2024.

Individual circumstances may exist that extend the time allowed to file for these credits. If you spent additional days in a combat zone after the filing due date of the return, you can add the number of additional days plus 180 days to the initial 3½-year statute of limitations to claim the credit on Form M99.

Example: If you served in a combat zone in 2019, you had to file your 2019 Form M99 by October 15, 2023, to meet the 3 1/2-year statute of limitations. Starting on June 1, 2020, you spent 60 days in a combat zone. You would have an additional 240 days to claim the credit (60 days plus 180 days). Therefore, you would have until June 10, 2024 (240 days after October 15, 2023) to file 2019 Form M99.

If you are a veteran of the U.S. military, including the National Guard and Reserves, you may qualify for a tax credit of up to $750 for your past service if your federal adjusted gross income is less than $37,500.

To qualify, you must have separated from military service before the end of the year, and one of these must be true:

• You served at least 20 years in the military
• You have a service-connected disability rating of 100% total and permanent (as rated by the U.S. Department of Veterans Affairs)
• You were honorably discharged and you receive a pension or other retirement pay for service in the military

For income qualifications, see the instructions for Schedule M1C, Other Nonrefundable Credits. If you are a part-year resident of Minnesota or a nonresident, you may still qualify for the credit. When completing the worksheet for Schedule M1C, use your percentage of Minnesota income from Schedule M1NR.

To claim this credit, you must complete Schedule M1C and include the schedule when you file your Minnesota income tax return. You may not claim this credit if you claim a subtraction for military retirement pay.

Minnesota allows taxpayers to subtract certain military retirement pay (including pensions) when calculating Minnesota taxable income and Minnesota alternative minimum taxable income.

To qualify for the subtraction, the pay must be:

• Taxable on the federal return
• Computed under U.S. Code, title 10, sections 1401 to 1414, 1447 to 1455, and 12733

To claim the subtraction, file Schedule M1M, Income Additions and Subtractions. You may not claim this subtraction if you claim the nonrefundable credit for past military service.

If you have Minnesota taxable income that is not subject to withholding and you expect to owe more than $500 in tax, you may need to pay quarterly estimated tax.

If you are a Minnesota resident who is stationed outside of Minnesota, you can ask your paymaster to withhold Minnesota income tax from your military pay to avoid having to pay estimated tax.

For details, see Estimated Tax.

If you are active-duty military personnel in a combat zone or contingency operation, you may qualify to file and pay Minnesota income taxes up to either:

• 180 days after the last day you are in the combat zone
• The last day of any continuous hospitalization for injuries sustained while serving in the combat zone

When you file your Minnesota income tax return, enclose a separate sheet stating you were serving in a combat zone.

If you are stationed outside the U.S. but are not involved in combat zone operations, you have until October 15 to file your return. You must pay at least 90% of your total tax by April 15 to avoid a late payment penalty. We will assess penalty and interest on any tax not paid by the regular due date. Unlike the federal rules, Minnesota does not allow an extension to pay your tax.

Extensions for Military Reservists and National Guard Members

For those in a combat zone, Minnesota follows the federal rules in the previous section.

For military reservists and National Guard members on federal active duty not in a combat zone:

• If you are called to active service in the U.S., you qualify for a six-month extension
• If you are called to active service abroad, you qualify for an extension of the period you served abroad plus six months

If you owe tax, pay the amount due in full, and file your return by the extension date, we will not assess penalties or interest.

If you are married and file a joint return, your spouse gets the same extension.

When you file your Minnesota income tax return, enclose a separate sheet stating that you are filing under the military extension.

The 3½-year statute of limitations to claim a refund is suspended for the period you have a “financial disability.” You have a financial disability if you are unable to manage your financial affairs due to a medically determinable physical or mental impairment. For details, see Internal Revenue Code, section 6511(h).

You must provide documentation of the disability when filing a return or when we request it. Documentation may include an explanation of the situation and a statement from a health care professional.

If a member of the military dies while in active service, they will not owe Minnesota income tax for that year. We will forgive or refund any outstanding penalties and debts for prior year taxes. A claim for refund of tax paid may be filed within seven years from the date the return was filed for any years the decedent was in active service.

Example: A Minnesota resident joined the U.S. Marines in 2021 and was killed in active service in a combat zone during 2023. He filed Minnesota income tax returns and paid tax to Minnesota for tax years 2021 and 2022. He filed returns on April 15, 2022 and April 15, 2023, respectively.

Note: If the military member and their spouse filed a joint return for any year, follow these steps to calculate the amount of tax to be refunded (or tax debt to be abated):

1. Determine how much income tax each spouse would have paid if they filed separate returns. Use the Married Filing Separately column in the tax tables.
2. Add these two tax amounts.
3. Divide the deceased person’s tax amount (step 1) by the total (step 2). The result is a percentage.
4. Multiply the actual tax paid by this percentage (step 3) to determine the refund amount.

Minnesota Residents

Only Minnesota residents are eligible to claim homestead status. We may ask you to provide information regarding your residency. If you are a resident for property tax purposes, you are a resident for income tax purposes.

Minnesota Residents Stationed Outside Minnesota

Active-duty military members who are stationed outside Minnesota solely for active duty are eligible for homestead status on acquired property. This applies even if the military member or a family member has not occupied the homestead.

To qualify, the military member must:

• Notify the county assessor in the county of purchase
• Indicate their absence is due to military service

Upon return from service, the military member must notify the county assessor. The difference between non-homestead and homestead taxes for the current year and preceding two years will be forgiven or refunded. The amount forgiven or refunded cannot exceed the time the person owned the property.

Homestead Credit Refund (for Homeowners) and Renter’s Property Tax Refund (Form M1PR)

If you are a Minnesota resident and you own or rent a home in Minnesota, you may qualify for a refund of property taxes paid. This applies regardless of where you are stationed in the military. If you are a nonresident, you do not qualify for a property tax refund unless your spouse is a full-year or part-year resident of Minnesota.

When applying for the refund, you must include any nontaxable income, such as combat or hazardous duty pay, as household income (veteran’s disability compensation is not included in household income). For details, see the instructions for Form M1PR, Homestead Credit Refund (for Homeowners) and Renter’s Property Tax Refund.

Market Value Exclusion for Veterans with a Disability

This program provides an annual property tax exclusion of up to $300,000 for the homestead of any of these:

• An honorably discharged veteran who has a service-connected disability rating of 70% or higher
• The surviving spouses of certain qualifying veterans and service members
• The primary family caregivers of qualifying veterans

To qualify for this exclusion, the veteran must be:

• Honorably discharged from the military
• Certified by the U.S. Department of Veterans Affairs as having a service-connected disability rating of 70% or higher
• Own and occupy a homesteaded property on December 31

Applications are available in your County Assessor’s office. You must apply by December 31 to qualify for the exclusion on the current year’s market value for taxes payable next year.

Note: You may still qualify for the Homestead Credit Refund (for Homeowners) on the qualifying tax amount from line 1 of your property tax statement.

For details, see Homestead Market Value Exclusion.