Gov. Tim Walz signed the 2023 Minnesota tax bill into law on May 24th.
The bill includes full Social Security state income exemption for those earning less than $100,000 annually (married/joint) or $78,000 (single/head of household), phasing out at $118,000 for single filers and 140,000 for joint filers.
The bill also allows for an income subtraction for people who receive public pensions. Those who make less than $100,000 a year could subtract as much as $25,000.
The tax bill would also send tax rebates of $260 to those who made up to $75,000 in 2021 or $520 for a married couple that made up to $150,000. Those with children could also get rebates for up to three of them. A family of five could get a $1,300 tax rebate overall.
The bill also provides Child & Working Family Tax Credit of up to $1,750 per child.
As for the revenue side, Minnesota will conform with federal tax law on global intangible low-tax income, which is commonly lent the acronym, GILTI.
Also raising revenue would be phasing out the amount of allowable itemized deductions for those making incomes above $304,000, reducing allowable deductions for dividends received, and an additional 1% tax on net investment income over $1 million, with agricultural land sale gains excluded.
The bill also contains a significant modification related to the calculation of the Pass-Through Entity (PTE) Tax for resident owners of entities taxed as Partnerships. Effective for years beginning after December 31,2022, the calculation of PTE for resident owners of entities taxed as partnerships is not subject to apportionment. In many cases, this will increase the benefit of the PTE tax deduction substantially. Unfortunately, this provision does not apply to the calculation of PTE tax for resident owners of entities taxed as S corporations which will continue to be subject to apportionment.
The tax bill does not contain a House-backed fifth income tax bracket on incomes over $1 million, a hike that was dropped during the negotiations.