MINNEAPOLIS (WCCO) — Before jumping into your 2017 tax returns, you should know about a bill Minnesota lawmakers passed last year that affects your state income taxes.
Shannon Blake knows all too well the frustration of tax season.
“I dread it every year,” she said.
Shannon is pretty tax savvy — she and her husband did their own taxes for years — but she didn’t know about a new student loan state tax deduction she qualifies for this year.
“I think I’ve heard so much more about the federal tax changes that I haven’t necessarily looked into my own state,” she said.
Laura Nickolay is a senior tax associate with White Oaks Wealth Advisors.
“You won’t see a lot of sweeping changes like this happening again for a while,” she said.
Nickolay says there are five key tax benefits Minnesotans should know about this year:
1) A new state social security benefits subtraction
This benefit is in addition to the federal exclusion.
“On the Minnesota level, you’ll now get an extra subtraction to offset some of those benefits,” Nickolay said.
It’s a plan that could save you up to $4,500.
2) A 529 college savings plan credit or subtraction
Anyone saving up for a child or grandchild’s education should take advantage of this one — a couple filing jointly can deduct $3,000.
3) A student loan tax credit
Shannon may qualify for this one. It gives up to $1,000 to couples filing jointly who are paying down college loans.
“Any amount of money back in my pocket is well received,” she said.
4) Tax credit for teachers earning a master’s degree
Educators who are still in school can claim up to $2,500 or the sum of tuition, fees, books and other instructional materials as a tax credit.
5) First-time home buyer savings account
This was the first year Minnesotans could open a first-time home buyer savings account. On your 2017 taxes, you can deduct any interest earned in that savings account from your taxable income.
If you have questions, it’s always a good idea to ask an expert. Shannon now has a CPA do her taxes so she doesn’t miss out on any deductions.
“They are aware of these changes and they can help interpret them for you,” she said.
There are some restrictions on the new tax benefits: Parents cannot make payments on their child’s student loan and take the tax credit. There are also income limits for the 529 college savings plan credit.
You can learn more about the new changes from the Minnesota Society of Certified Public Accountants.